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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, 17 June 20
MARKET INSIGHT - INTERMODAL
After experiencing record earnings during the first half of the year, the focus of headlines concerning the tanker market has shifted from the deve ...
Wednesday, 17 June 20
KOREA SOUTHERN POWER CO INVITED 80000 MT OF LOW CALORIFIC VALUE COAL FOR AUGUST 1H, 2020 LOADING
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO) has issued an International tender for 80,000 Metric Tons (MT) Min 4,200 kcal/kg - Max. ...
Tuesday, 16 June 20
A GLOBAL ECONOMIC SLUMP: WHAT WILL IT MEAN FOR METALS AND MINING? - WOOD MACKENZIE
Back before coronavirus knocked “normal” out cold, the key issues for miners were sub-investment prices, rising requirements for ESG an ...
Tuesday, 16 June 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.58 PCT - XINHUA
China Taiyuan coal transaction price index stood at 124.43 points Monday, up 0.58 percent week on week.
The index, released by China ...
Tuesday, 16 June 20
HIGHER IRON ORE PRICES OFFSET CORONAVIRUS-DRIVEN PRODUCTION RISK - FITCH RATINGS
Lower iron ore production in Brazil, resulting from rising coronavirus infections, should only marginally affect the cash flow of Vale and other gl ...
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- Vijayanagar Sugar Pvt Ltd - India
- Australian Commodity Traders Exchange
- Rashtriya Ispat Nigam Limited - India
- Gujarat Sidhee Cement - India
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- Economic Council, Georgia
- Makarim & Taira - Indonesia
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Iligan Light & Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Cement Manufacturers Association - India
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Salva Resources Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Coastal Gujarat Power Limited - India
- Wilmar Investment Holdings
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- Essar Steel Hazira Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Eastern Energy - Thailand
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- Ceylon Electricity Board - Sri Lanka
- Planning Commission, India
- Simpson Spence & Young - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- Metalloyd Limited - United Kingdom
- Ambuja Cements Ltd - India
- GMR Energy Limited - India
- European Bulk Services B.V. - Netherlands
- Parliament of New Zealand
- The Treasury - Australian Government
- Uttam Galva Steels Limited - India
- Power Finance Corporation Ltd., India
- Altura Mining Limited, Indonesia
- Indonesian Coal Mining Association
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- Borneo Indobara - Indonesia
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- Global Green Power PLC Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Xindia Steels Limited - India
- Wood Mackenzie - Singapore
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Posco Energy - South Korea
- Central Electricity Authority - India
- GAC Shipping (India) Pvt Ltd
- OPG Power Generation Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Barasentosa Lestari - Indonesia
- Commonwealth Bank - Australia
- Sakthi Sugars Limited - India
- Medco Energi Mining Internasional
- Billiton Holdings Pty Ltd - Australia
- Thiess Contractors Indonesia
- IEA Clean Coal Centre - UK
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Larsen & Toubro Limited - India
- Banpu Public Company Limited - Thailand
- Bulk Trading Sa - Switzerland
- Eastern Coal Council - USA
- Timah Investasi Mineral - Indoneisa
- Orica Australia Pty. Ltd.
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Mercator Lines Limited - India
- Coal and Oil Company - UAE
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Ministry of Finance - Indonesia
- Grasim Industreis Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Australian Coal Association
- Heidelberg Cement - Germany
- Minerals Council of Australia
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Meenaskhi Energy Private Limited - India
- Therma Luzon, Inc, Philippines
- Tamil Nadu electricity Board
- LBH Netherlands Bv - Netherlands
- London Commodity Brokers - England
- PowerSource Philippines DevCo
- Indian Oil Corporation Limited
- Central Java Power - Indonesia
- ASAPP Information Group - India
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- Indian Energy Exchange, India
- Electricity Authority, New Zealand
- White Energy Company Limited
- MS Steel International - UAE
- Gujarat Electricity Regulatory Commission - India
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Formosa Plastics Group - Taiwan
- Romanian Commodities Exchange
- Straits Asia Resources Limited - Singapore
- Binh Thuan Hamico - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Baramulti Group, Indonesia
- Chettinad Cement Corporation Ltd - India
- Pendopo Energi Batubara - Indonesia
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Bangladesh Power Developement Board
- Electricity Generating Authority of Thailand
- Energy Link Ltd, New Zealand
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Bukit Asam (Persero) Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- CIMB Investment Bank - Malaysia
- Tata Chemicals Ltd - India
- SMC Global Power, Philippines
- Edison Trading Spa - Italy
- Oldendorff Carriers - Singapore
- Riau Bara Harum - Indonesia
- India Bulls Power Limited - India
- Ind-Barath Power Infra Limited - India
- Aditya Birla Group - India
- Independent Power Producers Association of India
- Sinarmas Energy and Mining - Indonesia
- Attock Cement Pakistan Limited
- South Luzon Thermal Energy Corporation
- Jindal Steel & Power Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kumho Petrochemical, South Korea
- Samtan Co., Ltd - South Korea
- Sojitz Corporation - Japan
- SN Aboitiz Power Inc, Philippines
- Bharathi Cement Corporation - India
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- International Coal Ventures Pvt Ltd - India
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- New Zealand Coal & Carbon
- TNB Fuel Sdn Bhd - Malaysia
- Bhushan Steel Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Energy Development Corp, Philippines
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- Sical Logistics Limited - India
- Kobexindo Tractors - Indoneisa
- PTC India Limited - India
- Bhatia International Limited - India
- Bukit Baiduri Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Indika Energy - Indonesia
- Vedanta Resources Plc - India
- Kohat Cement Company Ltd. - Pakistan
- Dalmia Cement Bharat India
- Bhoruka Overseas - Indonesia
- Sarangani Energy Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercuria Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sree Jayajothi Cements Limited - India
- Indogreen Group - Indonesia
- McConnell Dowell - Australia
- Karaikal Port Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Georgia Ports Authority, United States
- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
- Siam City Cement - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Petron Corporation, Philippines
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- VISA Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Anglo American - United Kingdom
- Rio Tinto Coal - Australia
- Africa Commodities Group - South Africa
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