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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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- Medco Energi Mining Internasional
- Thiess Contractors Indonesia
- Madhucon Powers Ltd - India
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Mercuria Energy - Indonesia
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Bhoruka Overseas - Indonesia
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- Savvy Resources Ltd - HongKong
- Standard Chartered Bank - UAE
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- Tamil Nadu electricity Board
- Australian Coal Association
- Price Waterhouse Coopers - Russia
- Bahari Cakrawala Sebuku - Indonesia
- Manunggal Multi Energi - Indonesia
- Australian Commodity Traders Exchange
- Ambuja Cements Ltd - India
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- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Antam Resourcindo - Indonesia
- Global Business Power Corporation, Philippines
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- Energy Link Ltd, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Holcim Trading Pte Ltd - Singapore
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Coal Council - USA
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Sarangani Energy Corporation, Philippines
- Port Waratah Coal Services - Australia
- Straits Asia Resources Limited - Singapore
- Economic Council, Georgia
- Offshore Bulk Terminal Pte Ltd, Singapore
- The University of Queensland
- SMC Global Power, Philippines
- Salva Resources Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bulk Trading Sa - Switzerland
- PowerSource Philippines DevCo
- SMG Consultants - Indonesia
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Thai Mozambique Logistica
- Bukit Makmur.PT - Indonesia
- Videocon Industries ltd - India
- Singapore Mercantile Exchange
- Global Green Power PLC Corporation, Philippines
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- Indian Oil Corporation Limited
- Jindal Steel & Power Ltd - India
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Vizag Seaport Private Limited - India
- Posco Energy - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Orica Mining Services - Indonesia
- Parliament of New Zealand
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- Petron Corporation, Philippines
- Bangladesh Power Developement Board
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- Kartika Selabumi Mining - Indonesia
- Dalmia Cement Bharat India
- Ministry of Transport, Egypt
- Sindya Power Generating Company Private Ltd
- Petrochimia International Co. Ltd.- Taiwan
- ASAPP Information Group - India
- Latin American Coal - Colombia
- Electricity Authority, New Zealand
- Leighton Contractors Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- Makarim & Taira - Indonesia
- Intertek Mineral Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- Alfred C Toepfer International GmbH - Germany
- IHS Mccloskey Coal Group - USA
- TeaM Sual Corporation - Philippines
- Baramulti Group, Indonesia
- Jaiprakash Power Ventures ltd
- PetroVietnam Power Coal Import and Supply Company
- Carbofer General Trading SA - India
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
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- Vedanta Resources Plc - India
- Billiton Holdings Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Deloitte Consulting - India
- Independent Power Producers Association of India
- White Energy Company Limited
- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
- Parry Sugars Refinery, India
- Indogreen Group - Indonesia
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
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- Binh Thuan Hamico - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- VISA Power Limited - India
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- New Zealand Coal & Carbon
- Samtan Co., Ltd - South Korea
- Semirara Mining Corp, Philippines
- Simpson Spence & Young - Indonesia
- GAC Shipping (India) Pvt Ltd
- Semirara Mining and Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- The State Trading Corporation of India Ltd
- Karaikal Port Pvt Ltd - India
- GVK Power & Infra Limited - India
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Chamber of Mines of South Africa
- Aboitiz Power Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Therma Luzon, Inc, Philippines
- Oldendorff Carriers - Singapore
- Maheswari Brothers Coal Limited - India
- Heidelberg Cement - Germany
- Central Java Power - Indonesia
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Anglo American - United Kingdom
- Jorong Barutama Greston.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Essar Steel Hazira Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- McConnell Dowell - Australia
- Planning Commission, India
- IEA Clean Coal Centre - UK
- Energy Development Corp, Philippines
- Sakthi Sugars Limited - India
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- Tata Chemicals Ltd - India
- Uttam Galva Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- Indian Energy Exchange, India
- Marubeni Corporation - India
- ICICI Bank Limited - India
- Chettinad Cement Corporation Ltd - India
- Kepco SPC Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Minerals Council of Australia
- Xindia Steels Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Meenaskhi Energy Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Renaissance Capital - South Africa
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- PTC India Limited - India
- Star Paper Mills Limited - India
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- International Coal Ventures Pvt Ltd - India
- Mjunction Services Limited - India
- Gujarat Sidhee Cement - India
- Orica Australia Pty. Ltd.
- Central Electricity Authority - India
- Commonwealth Bank - Australia
- Merrill Lynch Commodities Europe
- The Treasury - Australian Government
- PNOC Exploration Corporation - Philippines
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- TNB Fuel Sdn Bhd - Malaysia
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- San Jose City I Power Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
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