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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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Sunday, 14 June 20
INDONESIAN COAL WAS STILL IN DEMAND; A 52,000-DWT SUPRAMAX FIXING DELIVERY CJK FOR A ROUND VOYAGE VIA INDONESIA AT $6,250 - BALTIC BRIEFING
Capesize
The Capesize market made new highs for the year this week after strong iron ore demand to the far east continued to develop in the mar ...
Friday, 12 June 20
CHINA CURBS COAL IMPORTS AFTER 5 MONTHS OF RECORD INFLOWS - SOURCES: REUTERS
China has stepped up customs checks for coal imports, leading to lengthy processing delays at ports, four sources familiar with the matter said, as ...
Friday, 12 June 20
COAL INDIA LIMITED SET FOR MARKETING DRIVE TO CREATE DEMAND - FINANCIAL EXPRESS
State-run miner Coal India (CIL), which is primarily focused on supplying coal to the power sector, is now reorienting its marketing to create dema ...
Friday, 12 June 20
MOODY'S REVISES BRENT OIL PRICE OUTLOOK TO $35/BARREL IN 2020 - TASS
Low oil prices are likely to exert the highest pressure on Iraq, Oman and Kuwait due to the limited space for the fiscal policy pursuit and higher ...
Thursday, 11 June 20
JAN-MAY, INDONESIA SHIPPED 175.15 MILLION TONS OF COAL TO ITS OVERSEAS BUYERS
Indonesia's coal production for the first 5 months of this year have reached 228 million tons. January – May 2020, Indonesia shipped US$ ...
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- Global Business Power Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Cement Manufacturers Association - India
- Petron Corporation, Philippines
- SMC Global Power, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- New Zealand Coal & Carbon
- Miang Besar Coal Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indika Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Globalindo Alam Lestari - Indonesia
- Gujarat Sidhee Cement - India
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Thiess Contractors Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sical Logistics Limited - India
- Interocean Group of Companies - India
- GAC Shipping (India) Pvt Ltd
- PTC India Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Indian Energy Exchange, India
- Chettinad Cement Corporation Ltd - India
- SMG Consultants - Indonesia
- CIMB Investment Bank - Malaysia
- Independent Power Producers Association of India
- PowerSource Philippines DevCo
- Ceylon Electricity Board - Sri Lanka
- Directorate General of MIneral and Coal - Indonesia
- Merrill Lynch Commodities Europe
- Singapore Mercantile Exchange
- Sindya Power Generating Company Private Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sakthi Sugars Limited - India
- Salva Resources Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Kohat Cement Company Ltd. - Pakistan
- Kartika Selabumi Mining - Indonesia
- Planning Commission, India
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- Goldman Sachs - Singapore
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Indian Oil Corporation Limited
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Australia Pty. Ltd.
- Aboitiz Power Corporation - Philippines
- Borneo Indobara - Indonesia
- Orica Mining Services - Indonesia
- Siam City Cement PLC, Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Binh Thuan Hamico - Vietnam
- Australian Coal Association
- Parry Sugars Refinery, India
- Posco Energy - South Korea
- Coal and Oil Company - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Riau Bara Harum - Indonesia
- Baramulti Group, Indonesia
- Jaiprakash Power Ventures ltd
- Holcim Trading Pte Ltd - Singapore
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Central Electricity Authority - India
- Banpu Public Company Limited - Thailand
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- Sarangani Energy Corporation, Philippines
- White Energy Company Limited
- Alfred C Toepfer International GmbH - Germany
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Madhucon Powers Ltd - India
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- McConnell Dowell - Australia
- Sinarmas Energy and Mining - Indonesia
- Wilmar Investment Holdings
- Bhushan Steel Limited - India
- Rio Tinto Coal - Australia
- Krishnapatnam Port Company Ltd. - India
- Directorate Of Revenue Intelligence - India
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Heidelberg Cement - Germany
- ICICI Bank Limited - India
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- Bangladesh Power Developement Board
- India Bulls Power Limited - India
- Xindia Steels Limited - India
- Formosa Plastics Group - Taiwan
- Standard Chartered Bank - UAE
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Trasteel International SA, Italy
- Jindal Steel & Power Ltd - India
- IEA Clean Coal Centre - UK
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- Minerals Council of Australia
- Deloitte Consulting - India
- Eastern Coal Council - USA
- Kobexindo Tractors - Indoneisa
- Australian Commodity Traders Exchange
- Africa Commodities Group - South Africa
- Energy Link Ltd, New Zealand
- Asmin Koalindo Tuhup - Indonesia
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- Electricity Authority, New Zealand
- Kumho Petrochemical, South Korea
- Tamil Nadu electricity Board
- Parliament of New Zealand
- Agrawal Coal Company - India
- Bukit Baiduri Energy - Indonesia
- Attock Cement Pakistan Limited
- Romanian Commodities Exchange
- Marubeni Corporation - India
- Timah Investasi Mineral - Indoneisa
- Anglo American - United Kingdom
- Simpson Spence & Young - Indonesia
- Metalloyd Limited - United Kingdom
- Latin American Coal - Colombia
- Cigading International Bulk Terminal - Indonesia
- GVK Power & Infra Limited - India
- Vizag Seaport Private Limited - India
- Ministry of Mines - Canada
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- Malabar Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Manunggal Multi Energi - Indonesia
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Bhatia International Limited - India
- Videocon Industries ltd - India
- LBH Netherlands Bv - Netherlands
- Coastal Gujarat Power Limited - India
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- ASAPP Information Group - India
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- TeaM Sual Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Oldendorff Carriers - Singapore
- Mjunction Services Limited - India
- Billiton Holdings Pty Ltd - Australia
- Sree Jayajothi Cements Limited - India
- Gujarat Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Meralco Power Generation, Philippines
- Bayan Resources Tbk. - Indonesia
- Meenaskhi Energy Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- The State Trading Corporation of India Ltd
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- Therma Luzon, Inc, Philippines
- Grasim Industreis Ltd - India
- PNOC Exploration Corporation - Philippines
- Economic Council, Georgia
- Carbofer General Trading SA - India
- Savvy Resources Ltd - HongKong
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Energy Development Corp, Philippines
- Price Waterhouse Coopers - Russia
- Chamber of Mines of South Africa
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- The University of Queensland
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Ind-Barath Power Infra Limited - India
- Power Finance Corporation Ltd., India
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