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Tuesday, 16 June 20
SHALE SHOCKED - WOOD MACKENZIE
 Capturing shut-ins in real time
Oil markets are searching for balance as the world reflects on the impact of the COVID-19 pandemic. The market has never experienced such a demand shock and it is difficult to predict what will happen next. What we do know, is that US producers have made drastic changes to overcome the excess supply in the market. From its peak in March to the end of May, our US Daily Oil Pipe Production data, shows that total US production has dropped 1.6 million bpd. That’s approximately 13% of daily barrels-out-of-the-ground removed from the market due to price-driven shut-ins. It’s hard to swallow just how impactful this dip in production is – and there are many factors at play in the market today. In this post, we will discuss how we’ve been tracking and corroborating shut-ins, impacted regions, and our thoughts on recovery.
Regional assessments of production
In April, our US daily oil production model began showing a meaningful downward response to market pressures. Because our data is broken out into eight different regions, we saw that this decline was driven by the Permian, which fell off by nearly a million bpd from March to May. Despite the Texas Railroad Commission’s decision not to curtail production, operators voluntarily shut their wells in through a market-driven exodus. During this time, our data was corroborated by myriad shut-in announcements from various producers. We are now expecting production to begin rebounding in the basin. We’ve already seen some recovery just south of the world’s most productive basin. Though it did not show as an intense nor rapid response, production in the Eagle Ford fell off by about 130,000 bpd since March. As of June 5, most of that production has recovered. While the shut-ins started in Texas, more followed in the Bakken and Gulf of Mexico.
Bakken production data recently published by the North Dakota Industrial Commission (NDIC) shows that March production came in at 1.428 million bpd, just above our modeled 1.422 million bpd. Between March 13 and May 15, our North Dakota model showed a 410,000 bpd decline, dipping below 1 million barrels at its lowest point. The NDIC also cited on May 15 that production has dipped below 1 million bpd, and that “it is going to be a rather slow process to get production back online.” However, our modeled production data recovered by about 90,000 bpd between May 15 and May 22 which rose with local hub pricing through the end of May. This recovery has since dipped, but recent signals have shown that production is rebounding again in response to the latest price rallies. More on recovery later.
The Gulf of Mexico has been hit just as hard as some onshore fields, despite expectations of resiliency due to larger projects with higher overhead. Since March, we’ve observed production fall off by over 200,000 bpd. At first, this decline was spread evenly across fields (we model production at 12 separate offshore platforms) and corroborated by April 22 shut-in announcements from Cantium and Fieldwood Energy. On May 2, the Delta House platform shut-in and production dropped to zero. During their May 11 earnings call, Kosmos Energy revealed that the platform’s operator had decided to shut the field for the entire month of May and move up their maintenance schedule. Our model captured this shut-in ten days in advance and our subscribers witnessed production ramp back up the day that this field restarted. Previously, our data has accurately predicted production recovery following hurricanes, and our model will also capture the next price-driven uptick in offshore production.
One recent example is Tropical Storm Cristobal, which made landfall over Louisiana on June 5 bringing heavy rain and winds of upwards of 50 mph. Tropical storm warnings were posted for much of the Louisiana coastline, Mississippi, Alabama and portions of the Florida Panhandle. Gulf of Mexico producers began shutting in production on Thursday in preparation for the storm and as of today, nearly 674 Mb/d has been shut-in. Atlantis, Thunder Horse, Na Kika, Jack/St. Malo, Baldpate/Magnolia, Lucius/Hadrian and Tubular Bells are shut-in or running at reduced rates. The BSEE reported that personale had been evacuated from a total of 185 production platforms, which is 29% of total production platform in the Gulf of Mexico. Seven dynamically positioned rigs had been moved off of location in the storm path as safety precaution, while three rigs had been evacuated. Our daily model predicted shut in volumes of 574 Mb/d, which is a decline of 33% of total production from the prior week. Our daily production estimates are able to track the outages in real-time, before the public BSEE reports.
Keep in mind that shut-ins are not uniform. Certain operators, like Exxon Mobil, shut in their most productive wells (according to their May 1 earnings call), while others shut in least economic wells. Some ran wells until failure, and others chartered crude tankers for extra storage space. Still, we’ve now seen sweeping declines across the regions that we model for – which drive our total estimate of crude production in the United States.
Our US Daily Oil Production model covers eight main regions, twelve Gulf of Mexico sub-regions, and a total US production estimate. The model utilizes Genscape’s Oil and Natural Gas Intelligence platforms for real-time inputs. These inputs include oil pipeline flow volumes, crude-by-rail cargo counting, and natural gas nominations. Using these proprietary inputs, Genscape captures a daily production estimate in the following regions with high accuracy: Permian, Gulf of Mexico, Eagle Ford, Bakken, DJ Basin, Alaska, Wyoming, and California. All other US production regions are captured in our total US production number. Regions included in our high-frequency estimate have a monthly correlation to state data greater than 95% R2. This accuracy creates user confidence and helps answer the next question, when will US production reach the bottom and begin recovery?
Calling the bottom and capturing recovery
As a result of these declines in our daily estimates, we have lowered our short-term total US production forecast significantly in Q2-2020 to take into account the shut-ins and completion deferrals. We expect that production will drop nearly 1.9 million bpd, from 12.8 million bpd in March to 10.9 million bpd in June. Of this reduction, we assume nearly 1.1 million bpd come from shut-ins, while 800,000 bpd is related to completion deferrals and rig activity reductions. We could see a jump in production by mid-June as curtailments come back online, however there is risk to this depending on how quickly demand recovers and where storage levels sit. The timing and volume could be dependent on if wells need workover activity or if they actually come back at higher levels due to pressure build up and flush production.
In fact, we’ve seen some incremental growth driven by North Dakota, Denver-Julesburg, and the Eagle Ford, signaling that production could be recovering. Local hubs like Clearbrook and Midland both traded above WTI throughout late April/early May, improving the margin on barrels produced in these regions. Still, since we have never seen widespread production shut-in like this in the past, many questions remain about how much volume will return and if smaller producing higher cost wells may be shut-in for good.
Keep in mind that our forecast will change according to prices and the now bottomed-out rig count, and that we provide our clients with a weekly update of our forward-looking expectations based on these inputs. Regardless of when production comes back, our users will be able to capture and quantify the recovery as it happens. Just as our data was a leading indicator of the first shut-ins, it will catch production on the way up. This will allow our clients to be able to update their balances in near real-time and respond to production movements appropriately.
Watch what happens next
For years, US crude production has been marked by steady, seemingly unstoppable growth. The drastic imbalance of oversupply in a market suppressed by a demand-choking pandemic has driven prices to historic lows. The resulting production dive is nearly indescribable, but nothing short of unprecedented. Data describes the situation much better than words, which is why we strive to provide the most accurate and high-frequency assessment of crude production in a cloudy market. The combined analytical expertise and powerful daily modeling of our US Crude Production suite will help you capitalize on upstream uncertainty. Join us in following shut-ins and capture crude recovery.
Source: Wood Mackenzie
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Wednesday, 12 June 24
CHINA ACCOUNTS FOR 16.3% OF AUSTRALIA'S COAL EXPORTS, FOLLOWED BY INDIA 14.4% - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels says Banchero Costa in its latest report.
...
Wednesday, 12 June 24
LNG NEWBUILDING VALUES AT RECORD HIGH: 78 NEWBUILD ORDERS PLACED IN 2024, DOUBLING 2023 - VESON NAUTICAL
The number of LNG newbuilding orders have more than doubled from the same period last year where 34 orders were placed, compared to 78 in the first ...
Monday, 10 June 24
CHINA'S MAY COAL IMPORTS RISE 11% ON LOWER DOMESTIC OUTPUT - REUTERS
China’s imports of coal rose 11% in May from a year earlier, customs data and Reuters records showed on Friday, as lower domestic output this ...
Tuesday, 04 June 24
HOW DO WESTERN SANCTIONS ON RUSSIA IMPACT THE GLOBAL METALS, MINING AND COAL MARKETS - WOOD MACKENZIE
The geopolitical landscape for Russia, as a major supplier of various commodities, has undergone a dramatic transformation since the invasion of Uk ...
Friday, 22 March 24
CASE STUDY: DANGERS OF COAL CARGO - SKULD
Recently, a bulk cargo vessel carrying coal from South Africa to Singapore suffered a fatal accident, resulting in the deaths of three crew members ...
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- ASAPP Information Group - India
- Ind-Barath Power Infra Limited - India
- Posco Energy - South Korea
- Aboitiz Power Corporation - Philippines
- Formosa Plastics Group - Taiwan
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- Romanian Commodities Exchange
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- Intertek Mineral Services - Indonesia
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- Coastal Gujarat Power Limited - India
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- Chamber of Mines of South Africa
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- Energy Link Ltd, New Zealand
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- CIMB Investment Bank - Malaysia
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- Planning Commission, India
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- Coalindo Energy - Indonesia
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- Vijayanagar Sugar Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
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- Bangladesh Power Developement Board
- Ministry of Transport, Egypt
- Indian Oil Corporation Limited
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- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Siam City Cement - Thailand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Straits Asia Resources Limited - Singapore
- Independent Power Producers Association of India
- Global Business Power Corporation, Philippines
- Australian Commodity Traders Exchange
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- Bayan Resources Tbk. - Indonesia
- Alfred C Toepfer International GmbH - Germany
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- Videocon Industries ltd - India
- Central Java Power - Indonesia
- Sojitz Corporation - Japan
- Medco Energi Mining Internasional
- Coal and Oil Company - UAE
- Renaissance Capital - South Africa
- Electricity Authority, New Zealand
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Gujarat Sidhee Cement - India
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Mercator Lines Limited - India
- Latin American Coal - Colombia
- Barasentosa Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- Wilmar Investment Holdings
- VISA Power Limited - India
- Siam City Cement PLC, Thailand
- Miang Besar Coal Terminal - Indonesia
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indika Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Tamil Nadu electricity Board
- Thai Mozambique Logistica
- Star Paper Mills Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMG Consultants - Indonesia
- Aditya Birla Group - India
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Billiton Holdings Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Larsen & Toubro Limited - India
- Edison Trading Spa - Italy
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- PNOC Exploration Corporation - Philippines
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- Bulk Trading Sa - Switzerland
- Global Green Power PLC Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Petron Corporation, Philippines
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Coal Council - USA
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- Binh Thuan Hamico - Vietnam
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Singapore Mercantile Exchange
- Parliament of New Zealand
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- Sakthi Sugars Limited - India
- Kaltim Prima Coal - Indonesia
- Carbofer General Trading SA - India
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Indonesian Coal Mining Association
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Africa Commodities Group - South Africa
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- Vedanta Resources Plc - India
- Semirara Mining and Power Corporation, Philippines
- India Bulls Power Limited - India
- Karaikal Port Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Kumho Petrochemical, South Korea
- Jindal Steel & Power Ltd - India
- The University of Queensland
- Xindia Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Heidelberg Cement - Germany
- Malabar Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Meenaskhi Energy Private Limited - India
- London Commodity Brokers - England
- Semirara Mining Corp, Philippines
- Mercuria Energy - Indonesia
- SMC Global Power, Philippines
- Borneo Indobara - Indonesia
- Altura Mining Limited, Indonesia
- Marubeni Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Sarangani Energy Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Banpu Public Company Limited - Thailand
- PTC India Limited - India
- Krishnapatnam Port Company Ltd. - India
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Rio Tinto Coal - Australia
- Goldman Sachs - Singapore
- Sical Logistics Limited - India
- Baramulti Group, Indonesia
- Gujarat Electricity Regulatory Commission - India
- New Zealand Coal & Carbon
- Wood Mackenzie - Singapore
- Anglo American - United Kingdom
- Antam Resourcindo - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Australian Coal Association
- Kideco Jaya Agung - Indonesia
- Indo Tambangraya Megah - Indonesia
- Vizag Seaport Private Limited - India
- Jaiprakash Power Ventures ltd
- Bahari Cakrawala Sebuku - Indonesia
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
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- Bhushan Steel Limited - India
- Riau Bara Harum - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Parry Sugars Refinery, India
- GVK Power & Infra Limited - India
- Indian Energy Exchange, India
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