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World Oil Supply - September 2017

Source: OPEC_RP170907 9/12/2017, Location: Europe

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Preliminary data indicates that world oil supply was down by 0.41 mb/d m-o-m in August to average 96.75 mb/d, higher by 1.66 mb/d, y-o-y.

Non-OPEC oil supply in August declined by 0.32 mb/d m-o-m to average 57.68 mb/d. Non-OPEC supply is projected to grow by 0.78 mb/d y-o-y in 2017, which is unchanged from last month’s prediction due to the offsetting of the upward revision in the FSU by the downward revision in OECD Americas, to average 57.80 mb/d. The main changes for the month is a result of an increase in expected oil production growth in Kazakhstan by 0.04 mb/d in 2017 and lower growth in the US oil supply by 0.07 mb/d in 2017. The nonOPEC oil supply forecast in 2018 was revised down by 0.10 mb/d due to the downward revisions in Kazakhstan and Russia. Hence, non-OPEC supply to average 58.80 mb/d with a growth of 1.00 mb/d for 2018 is anticipated.

OPEC NGLs and non-conventional liquids production averaged 6.31 mb/d in 2017, an increase of 0.17 mb/d, y-o-y. In 2018, production is forecast to grow by 0.18 mb/d to average 6.49 mb/d.

In August 2017, OPEC crude oil production decreased by 79 tb/d, according to secondary sources, to average 32.76 mb/d.

Non-OPEC oil supply highlights in 2017
Non-OPEC oil supply in August declined by 0.32 mb/d m-o-m to 57.68 mb/d, according to the preliminary data as US oil production from the Gulf of Mexico (GoM) and parts of Eagle Ford was partially disrupted by Hurricane Harvey and lower output was seen coming from the North Sea and Kazakhstan following seasonal maintenance. Meanwhile, production in Canada, other OECD Europe and Brazil increased.

The forecast for non-OPEC supply growth for 2017 remains unchanged from the previous MOMR at 0.78 mb/d, but absolute supply has been revised up by 0.03 mb/d to 57.80 mb/d, partially due to changes following the latest information including the upward adjustment in 2Q17 and the upward revision in 2H17 due to the new assessment of production in Kazakhstan. It is expected that US oil supply will account for the biggest share of non-OPEC supply growth for 2017 at 0.63 mb/d and the remaining comes mainly from Brazil, Canada and Kazakhstan, while Mexico, China and Colombia are the main countries showing a contraction. Graph 5 - 2: Annual supply changes for selected countries in 2017.

Non-OPEC oil supply highlights in 2018
Non-OPEC supply growth in 2018 is expected at 1.00 mb/d, following a downward revision of 0.10 mb/d to average of 58.80 mb/d. This is mainly due to the downward revisions in the Russian and Kazakh oil supply forecasts. The US, Brazil, Canada, UK and Congo are expected to be the key countries driving growth next year, as opposed to China, Mexico, Colombia, Azerbaijan and Oman, which are expected to see a further decline in oil supply.

Supply from Russia is now seen growing by 0.03 mb/d to average 10.98 mb/d in 2017, followed by growth of 0.06 mb/d in 2018.

Highlights actual non-OPEC quarterly oil supply in 2016 and the forecast for 2017 and 2018. The quarterly distribution for non-OPEC supply in 2017 indicates the regular seasonal pattern due to maintenance work, particularly in offshore areas, but with higher production levels compared to the same quarters in 2016. It is forecast that 4Q17 will be the highest quarter for oil supply compared to other quarters. For 2018, due to the increase in US shale production, higher growth is expected, as well as a higher quarterly distribution throughout the year.

The main factors for higher growth expectations in 2017 compared to last year are the current improving price environment more suitable for the shale producers, start-up of giant projects such as Kashagan, the increasing number of active rigs in North America and the proportionally remarkable investment in upstream projects. Nevertheless, non-OPEC supply is predicted to show mild growth of 0.16 mb/d in 2H17 compare to 1H17. This market development suggests that more possibilities being ready for market rebalancing in the 1H18.

The main factors for higher growth expectations in 2017, as opposed to last year, are the currently improving price environment, which is more suitable for the shale producers, the start-up of giant projects such as Kashagan, the increasing number of active rigs in North America and the proportionally remarkable investment in upstream projects. Nevertheless, non-OPEC supply is predicted to show mild growth of 0.16 mb/d in 2H17 compared to 1H17. This market development suggests the possibility of more market rebalancing in 1H18.

The quarterly oil supply forecast in 2017 and 2018 (Graph 5 – 5 and Table 5 - 2) indicates a yearly higher oil output level from 2016-2018, due to higher investment. This leads to higher production and annual growth in non-OPEC supply in 2017 and the next year. Nevertheless, the forecast for non-OPEC supply in 2018 is associated with a high level of uncertainty as well as possibility.

The expected growth in 2017 in all non-OPEC regions except China, Other Asia and the Middle East will continue next year, led by OECD Americas with 0.87 mb/d, Latin America with 0.11 mb/d, OECD Europe with 0.08 mb/d, Africa with 0.07 mb/d, the FSU with 0.06 mb/d and OECD Asia Pacific with 0.04 mb/d. However, declines are anticipated in 2018 in China, the Middle East and Other Asia of 0.17 mb/d, 0.05 mb/d and 0.04 mb/d, respectively.

OECD liquids production in 2017 was revised down by 31 tb/d, mainly due to a downward revision in OECD Americas, which is now expected to increase by 0.64 mb/d to average 25.48 mb/d in 2017. For 2018, OECD supply is forecast to average 26.46 mb/d, representing a growth of 0.99 mb/d, mainly from OECD Americas.

OECD Americas
OECD Americas’ oil supply in 2017 is predicted to average 21.25 mb/d. This represents an increase of 0.65 mb/d y-o-y. The oil supply forecast was revised down by 48 tb/d this month owing to the downward adjustment of historical data in 2Q17 and the downward revision in 3Q and 4Q forecast for 2017. Oil supply in the US and Canada will grow while a contraction is expected in Mexico. In 2018, supply in the OECD Americas is expected to grow by 0.87 mb/d to average 22.12 mb/d. The US and Canadian oil supply is expected to grow, while a continuation of annual decline in Mexico is anticipated for next year.

According to the US Energy Information Administration (EIA), monthly crude oil production averaged 9.10 mb/d in June 2017, representing a decline of 73 tb/d over May, while US NGLs were up by 31 tb/d to average 3.75 mb/d, mainly from unconventional sources. Oil production increased in Texas (+13 tb/d) and Oklahoma (+15 tb/d), whereas output in Alaska (-45 tb/d), the Gulf of Mexico (-23 tb/d), New Mexico (-22 tb/d), and North Dakota (-8 tb/d) declined. US total liquid supply, excluding processing gains, decreased in June by 0.05 mb/d m-o-m to average 14.12 mb/d, which is a growth of 0.60 mb/d for the year to date.

US crude oil production q-o-q increased by 110 tb/d in 2Q17, while it rose by 207 tb/d in 1Q17 from 4Q16. It is expected that US crude oil production will grow by 0.42 mb/d y-o-y to average 9.28 mb/d, while US NGLs output is expected to grow by 0.21 mb/d. It is anticipated that US liquid supply in 2017 and 2018 will increase by 0.63 mb/d and 0.84 mb/d to average 14.26 mb/d and 15.09 mb/d, respectively.

Storms, heavy rains and catastrophic floods caused by Hurricane Harvey have affected Texas and the Louisiana Gulf Coast which is home to about half of US refining capacity, pipelines and crude oil production sites. In terms of crude oil production disruption, around 18% of the GoM’s production, the equivalent of 0.32 mb/d of crude oil output was shut down, while the disrupted volume amounted to about 0.40 mb/d at the beginning of storm. The extent of damages caused to offshore platforms, onshore oil production infrastructures and sites are unknown yet. At the beginning of September, about 9% of oil production, which equates to 153 tb/d and 13% of natural gas production remain shut in the Gulf of Mexico, according to the Bureau of Safety and Environmental Enforcement. Moreover, 75 production platforms remain inaccessible to staff, which represents 10.18% of the 737 manned platforms in the Gulf of Mexico. There is no official estimate of the damages caused by the significant flooding on the wells in the eastern part of the Eagle Ford play in Texas, although it is purported that at least 0.3 mb/d (around a quarter) of output in Eagle Ford has been shut down.

US Lower-48 states onshore crude oil output declined from a peak of 7.63 mb/d in March 2015 to 6.51 mb/d in December 2016, but in 2017 it seen renewed momentum. In June 2017 it had grown by 475 tb/d over the December level to average 6.98 mb/d. It is expected that Lower-48 States onshore crude oil output in 2017 will grow by 465 tb/d y-o-y to average 7.10 mb/d. US tight oil production in June grew by 0.08 mb/d, m-o-m to average 4.67 mb/d. According to the EIA’s official data, tight crude production peaked at its highest level of 4.70 mb/d in March 2015. Tight crude output from tight horizontal wells increased in the Permian by 0.04 mb/d to average 1.83 mb/d in June and preliminary 1.88 mb in July and by 0.03 mb/d in Eagle Ford to average 1.19 mb/d in June and preliminary 0.04 mb/d in July. Other regions were more or less stagnant or experienced minor declines.

As of June 2017, tight crude continued to grow by 514 tb/d to average 4,674 tb/d and production in Texas, Oklahoma, Colorado and North Dakota grew from January, while US crude production has grown overall by only 0.33 mb/d. In actuality, US shale output is being offset by large declines in Alaska, the GOM and all other regions. US tight crude would have to exceed the level it had reached throughout the past 6 months. Yet, in the face of stagnating rig counts, declining non-shale productions and lower oil prices, expectations for the current year, y-o-y growth will not exceed for the whole year by more than 0.5 mb/d.

US oil rig count
According to Baker Hughes’ latest report for the week to 8 September 2017, the US drilling rig count has risen by 1 unit to 944 rigs (80.1% oil and 19.8% gas) w-o-w, while oil rig count declined by 3 units to 756 rigs while gas rig count increased by 4 units to 187 rigs. The US oil rig count was higher by 436 rigs y-o-y, an increase of 86%, and in terms of oil and gas split, increased by 83% to 756 rigs and 108% to 187 rigs, respectively. As a result, the US rig count increased by 540 units (+134%) from the bottom of the rig count on May 2016.

On a monthly basis, it was for the first time that the number of oil rigs decreased compares to the consecutive months of increasing from May 2016, as well as decreasing also in the total US rig count by 7 units to 947 rigs. The US oil rig count in August was down by 2 units m-o-m to average 763 rigs, while it was increased by 18 units a month earlier. In terms of oil rig count in the most prolific Basins, it is increased by 4 units m-o-m in Permian to average 378 oil rigs in August, added 4 units in Cana Woodford to 65 rigs and up by 1 oil unit in DJ-Niobrara to 30 rigs, while it was decreased in Eagle Ford, Williston and other Basins. Onshore rigs climbed by 441 units y-o-y to 923 rigs. 83.4% of the rigs in the first 8 months of the current year were active in horizontal drilling, although it declined by 6 units m-o-m to average 799 rigs in August. The number of oil rigs in GoM was declined by 5 units m-o-m to average 14 rigs owing to Hurricane Harvey.

North American oil & gas industry offer support for NAFTA ahead of renegotiation.
The American Petroleum Institute (API), Canadian Association of Petroleum Producers (CAAP) and the Mexican Association of Hydrocarbon Companies (AMEXHI) released a joint paper in August, highlighting their policy positions on further strengthening the competitiveness of the North American energy industry under the North American Free Trade Agreement (NAFTA).

“The natural gas and oil industry across North America is united in our support for NAFTA and the significant consumer, economic and security benefits it generates,” said API President and CEO Jack Gerard. “As the energy flows between our countries continue to grow, it’s important to highlight the critical role NAFTA has played in facilitating cross-border trade and investment in energy.” He added that the energy trade alliance under NAFTA supports jobs and manufacturing in energy.

The US administration has called for renegotiating NAFTA, which entered into force in 1994, stepping back from an initial plan to terminate the agreement.

The paper notes the dramatic changes that have taken place in the North American energy industry since NAFTA entered into force in 1994. This includes the surge in US oil and gas production led by the shale industry, the opening up of Mexico’s energy sector to foreign and domestic private investment for the first time in over seventy-five years, and the developments in Canada’s energy infrastructure, oil sands sector, and liquefied natural gas (LNG) production.

The paper supports a number of specific policy positions, particularly preserving NAFTA’s elimination of tariffs in the trade of crude oil, natural gas, and refined products, as well as other goods supporting energy exploration.

Other policy aims include preserving regulatory cooperation and allowing for fully liberalized trade across North America. It also highlights the support for preserving provisions for investment protections and dispute settlement, including rules that restrict expropriation of investments and provide for timely and adequate compensation when expropriation occurs.

On 5 September, trade representatives from the three countries completed the second round of NAFTA renegotiations, following five days of meetings in Mexico City, Mexico. According to an official joint statement, “the renegotiating process is expected to complete “towards the end of this year”.

Canadian oil sands output dropped by 0.23 mb/d and 0.55 mb/d in March and April, respectively, compared with February following wildfires at Syncrude’s Mildred Lake plant in mid-March. In May, production saw a slight rebound by 113 tb/d m-o-m to average 2.43 mb/d. Conventional crude oil was stagnant in April and May at 1.2 mb/d, 33 tb/d lower than in February, while NGLs production increased by 27 tb/d m-o-m to average 906 tb/d in July. As a result, Canada’s oil supply in May rose by 0.14 mb/d m-o-m to average 4.54 mb/d. Preliminary output for 2Q17 indicated growth of 0.62 mb/d y-o-y, although most of this was due to low output after last year’s wildfire disaster. August output is estimated at 4.77 mb/d, lower by 0.27 mb/d compared with February’s peak level. The 350 tb/d Mildred Lake plant was expected to return to full production by August, although it is two months behind its original schedule; maintenance is planned for later in the year. Some upgraders underwent maintenance in 3Q17, such as Scotford in July, and Horizon starting in September.

On the other hand, Chinese firm CNOOC announced that the Hangingstone project commenced production in early August. The project, located in Alberta, consists of steam-generating equipment, well pad facilities, 32 well pairs, water treatment services and bitumen flowlines. It is expected to reach a peak production rate of approximately 20 tb/d in 2018.

Total Canadian oil supplies are forecast to expand by 190 tb/d in both 2017 and 2018 to average 4.70 mb/d and 4.89 mb/d, respectively.

Mexican oil production declined by 29 tb/d in July to average 2.28 mb/d, mainly owing to a decline in crude oil of 22 tb/d to below 2.0 mb/d for the first time in more than 20 years. July’s output was lower by 0.17 mb/d y-o-y, with the majority of declines coming from small fields. The beginning of maintenance at the Ku-Maloob-Zaap (KMZ) field in late July also led to a higher drop in the month. The decline was expected to worsen when maintenance continued in August. Average crude oil production in 1H17 registered at 2,016 tb/d. In June and July, the bulk of the decline stemmed from the Maloob field, which dropped by 20 tb/d from a month earlier.

For 2017 as a whole, Mexican oil output is expected to decline by 0.17 mb/d, followed by a predicted 0.16 mb/d decline in 2018.

OECD Europe
OECD Europe’s oil supply rose by 0.11 mb/d m-o-m in July to 3.83 mb/d, though this was lower by 0.12 mb/d, y-o-y. Production in Norway and other OECD Europe, particularly Italy, rose when Eni restarted its southern Italian Val d’Agri oil field. The oil supply for 1H17 was up by 0.04 mb/d over 1H16 to reach 3.87 mb/d. Owing to seasonal maintenance at offshore platforms, output in the region was down by 0.13 mb/d in 2Q17, while in the same period of 2016 it was above that of the current year at 0.2 mb/d. The oil supply for 2H17 is expected to be lower by 0.11 mb/d over 1H17 due to less expected production in the UK and Norway. Crude and condensate output from the Denmark portion of the North Sea is also forecast to fall in 2017 and 2018, continuing a long-term trend. Production in Denmark is expected to drop by 0.01 mb/d in both 2017 and 2018. As a whole, minor growth of 10 tb/d is anticipated for the current year; the pace will increase next year at 0.08 mb/d.

Norway’s preliminary production figures for July show an average daily production of 2.00 mb/d of oil, indicating an increase of 0.09 mb/d, m-o-m. In July, crude oil output was pegged at 1.62 mb/d – higher by 52 tb/d m-o-m, NGLs stood at 0.35 mb/d and condensate at 0.03 mb/d. The uptick in liquids, m-o-m, came after the output was curtailed in June due to maintenance at Gullfaks. The continuation of an unplanned outage at the Gjoa and Vega fields in the first week of the month partially offset the m-o-m gain. However, total oil output in July compared with the previous July was down by 0.13 mb/d. At the end of the month, Statoil and its partners started production at the Byrding field as planned. Recoverable volumes in Byrding – an oil and gas field north of the Troll field in the North Sea – are estimated to be 11 million barrels of oil equivalent. The field is expected to produce nearly 8 tb/d at its peak in 2017–18.

According to Norwegian Petroleum Directorate (NPD) data, oil production in July is about 7.0% below that of the same month last year and about 0.7% below the NPD’s prognosis for July 2017. Oil production is about 1.2% above the prognosis so far this year and is expected to fall back again in August and even September as field maintenance rises, with work planned at the Gudrun, Skarv, Valhall and Vigdis fields, impacting an average of 0.05 mb/d of output across the month. In September this will continue at the Goliat field, impacting 0.1 mb/d. NGLs and condensate increased by 0.09 mb/d compared with June. Oil production in 1H17 grew by 0.06 mb/d compared with 1H16, but this is expected to decline in 2H17 by 0.04 mb/d vs 1H17. The oil supply forecast for 2017 was revised up by 0.01 mb/d to 2.02 mb/d, indicating annual growth of 0.03 mb/d, y-o-y. For 2018, a contraction of 0.01 mb/d is expected, to reach an average of 2.01 mb/d.

UK’s oil output in July remained unchanged for the third consecutive month at 1.05 mb/d, down by 0.03 mb/d y-o-y. Output fell y-o-y by 0.02 mb/d in 1H17, despite the start-up of projects, including Ithaca’s 30 tb/d, Greater Stella, Repsol-Sinopec’s 40 tb/d Montrose, BP’s 130 tb/d Schiehallion, and Enquest’s 50 tb/d Kraken projects. Beginning of July, key fields were offline for work, including Forties and Britania for some time however production returned from maintenance from fields such as Alma, Galia, Forties, Beryl and J-Area. Peak UK field maintenance occurred in August when around 0.2 mb/d of production was taken offline.

UK’s overall oil production in 2017 is predicted to decline by 20 tb/d y-o-y to average 1.01 mb/d, despite new volumes from the continued ramp up of previous projects such as Kraken, Monarb, Flyndre and Greater Stella. However, growth of 0.08 mb/d for an average oil supply of 1.08 mb/d is expected in 2018.

Developing Countries
The total oil production of developing countries (DCs) is estimated to grow by 0.09 mb/d y-o-y to average 12 mb/d in 2017, revised down by 0.02 mb/d in September compared with the previous assessment, owing to downward revisions in Africa and Other Asia, mainly due some upward and downward revisions to historical data in Malaysia, Asia others and South Africa. Preliminary supply data for July of 11.92 mb/d indicates a m-o-m decline of 0.09 mb/d, which is 0.03 mb/d lower than a year earlier, though higher output is expected to be seen in August m-o-m at 12.04 mb/d. Oil production is expected to increase in Latin America by 0.15 mb/d to average 5.26 mb/d in 2017, mainly in Brazil where it is expected to rise by 0.26 mb/d, while other countries in the region are anticipated to witness declines. Colombian oil production stood at 0.86 mb/d in July, unchanged from June and 13 tb/d higher than a year ago. Production in Colombia fell due to spending cuts from the largest upstream players as well as a number of outages. In Africa, a production increase of 0.04 mb/d – primarily from Ghana and Congo – is expected for 2017 to lead to an average of 1.85 mb/d. The oil supply from Other Asia and the Middle East declined by 0.05 mb/d and 0.05 mb/d in 2017 and 2018 respectively to average 3.67 mb/d and 1.23 mb/d, respectively.

In 2018, DC’s supply is forecast to grow by 0.10 mb/d y-o-y to average 12.10 mb/d, unchanged from previous expected growth figures, but with a change in absolute supply of 12.10 mb/d, compared with the last MOMR. Oil production in Africa is expected to grow at a faster pace y-o-y (0.07 mb/d) to average 1.92 mb/d, while growth in Latin America will be slower (0.11 mb/d) to average 5.37 mb/d. The oil supply from Other Asia and the Middle East will decline in the next by 0.04 mb/d to 3.63 mb/d and by 0.05 mb/d to 1.18 mb/d, respectively.

Latin America
Brazilian liquids output declined by 0.07 mb/d m-o-m in July to 3.29 mb/d. In fact, a decline in crude output of 72 tb/d led to a lowering of crude supply to average 2.60 mb/d, weighed by maintenance at the Parque das Baleias complex. According to Petrobras preliminary data in August, liquids supply is expected to increase to average 3.38 mb/d. Higher output in 2H17 by 0.16 mb/d is expected compared with 1H17. Once again, growing production in the Santos Basin offset declines from the more mature Campos Basin fields, while production in the Campos Basin dropped by 50 tb/d m-o-m to 1.36 mb/d – a decline of 168 tb/d from the previous year. Petrobras discovered oil in the pre-salt layer of the Campos Basin in the middle of August, close to Marlim Sul field. This is the first commercial pre-salt oil find in the area. Onshore output also continued to decline, shrinking by 25 tb/d, or 17%, from one year ago. Production in the Santos Basin rose nearly 80 tb/d from a month earlier, to 1.14 mb/d in June – some 320 tb/d higher than a year earlier. Production from Lula, in particular, contributed to gains, adding 66 tb/d m-o-m to reach a new record high of 0.76 mb/d – 244 tb/d higher than a year ago. Output at Saphino? also increased to near record highs at around 0.26 mb/d, 40 tb/d higher than a year earlier.

Brazil’s oil supply is expected to grow by 0.24 mb/d y-o-y to average 3.38 mb/d and for 2018 growth of 0.21 mb/d with an average supply of 3.59 mb/d is predicted.

Other Asia
The liquids supply in the Other Asia region is seen to contract by 0.05 mb/d in the current year to average 3.67 mb/d, revised down by 0.01 mb/d due to a base change following downward revisions in the historical production data of Malaysia as well as an upward revision in Other Asia due to India; the other countries in this region declined in 2017. Next year, the contraction will be 0.04 mb/d to average 3.63 mb/d and India is expected to grow more.

Crude oil production in Malaysia after maintenance curbed output over the preceding two months rebounded in June by 61 tb/d to 0.68 mb/d, while preliminary July data indicated a decline of around 0.04 mb/d. Average crude oil output registered 0.66 mb/d, unchanged compared with 1H16, but up by 0.01 mb/d compared with 2H16. Malaysian total liquids production in 1H17 registered 0.73 mb/d, 0.03 mb/d higher than October 2016 levels. Oil production in Malaysia increased when the Malikai project started up last December after the Declaration of Cooperation was signed with OPEC.

Production of crude oil in Indonesia is estimated to have averaged 0.71 mb/d in July, a 38 tb/d decline from a year ago. Average crude oil production was down by 22 tb/d in 1H17 compared with 2H16 and it is expected that total liquids output in 2017 will contract by 0.02 mb/d to average 0.91 mb/d. This will be added next year, leading to a contraction of 0.03 mb/d.

Africa’s oil supply is projected to grow by 0.04 mb/d to average 1.85 mb/d in 2017, revised down by 0.01 mb/d due to a historical revision in production data from Africa other. It is expected that oil production in 2017 will grow in the Congo by 40 tb/d to average 0.35 mb/d, in Ghana by 70 tb/d to average 0.16 mb/d, and in Chad by 20 tb/d to average 0.13 mb/d. Production in Egypt, the Sudans, and Africa other is anticipated to decline in 2017, while oil output in South Africa is estimated to remain unchanged over a year earlier.

For 2018, the oil supply in African non-OPEC countries is expected to grow by 70 tb/d, with the rise coming mainly from Chad, Congo and Ghana to average 1.92 mb/d.

FSU’s oil supply is estimated to grow by 0.15 mb/d in 2017 to average 14.01 mb/d, revised up by 50 tb/d from the August MOMR. An upward revision of 0.04 mb/d was seen in Kazakhstan’s production growth in 2017 and a minor rise of 0.01 mb/d from Russia. Oil production in Azerbaijan is predicted to contract by 0.06 mb/d to average 0.79 mb/d in 2017, while the oil supply from other FSU countries will be stagnant at 0.37 mb/d. For 2018, FSU’s oil supply was revised down by 0.10 mb/d due to lower expectations for growth in Russia and Kazakhstan of 0.06 mb/d each; other countries in the region will also decline.

Preliminary Russian crude oil and condensate supply declined in August by 40 tb/d m-o-m according to the Ministry of Energy, while NGLs output was stagnant at 0.94 mb/d. July and August oil supplies were higher by 0.19 mb/d and 0.10 mb/d y-o-y, averaging 11.26 mb/d and 11.22 mb/d, respectively. With production ramping up in Novoportovskoye, Prirazlomnoye and Messoyakha fields, Gazpromneft’s output in July was 0.02 mb/d, or 3%, higher, than in October and 0.09 mb/d above a year ago in July. Condensate output in Gasprom also rose through the start-up of the Vostochno-Messoyakhskoye field, although according to data from the Ministry of Energy, some major Russian oil companies cut output by roughly 3% since October. However, Russia’s oil supply in 1Q17 and 2Q17 was registered at 11.25 mb/d and 11.26 mb/d, respectively.

OPEC’s forecast for Russia’s quarterly oil supply has been kept at 10.98 mb/d for 3Q17, 4Q17 and 1Q18, assuming production of 300 tb/d below October levels, though the oil supply for 1Q17 and 2Q17 was revised up due to historical production data. As a result, growth of 0.03 mb/d is now expected, averaging 11.12 mb/d in 2017, unchanged from the previous month’s assessment. Expectations for next year’s supply growth have been revised down by 0.07 mb/d, leading to an increase of 0.06 mb/d in 2018.

In Azerbaijan, according to data provided by the Ministry of Energy, oil production averaged 0.82 mb/d in July, almost the same as in June, but lower by 42 tb/d y-o-y. Of this, 0.74 mb/d was crude and 0.08 mb/d NGLs. Azerbaijan averaged an oil supply output of 803 tb/d in last seven months of 2017, 34 tb/d lower than last October. Oil output in 2Q17 was pegged at 0.81 mb/d, lower by 70 tb/d y-o-y. It is expected that the oil supply for 2017 and 2018 will decline by 0.06 mb/d and 0.05 mb/d y-o-y to average 0.79 mb/d and 0.74 mb/d, respectively.

Kazakhstan’s crude production was stagnant at 1.48 mb/d in July compared with June. NGLs output also remained steady at 0.27 mb/d in July, indicating a total liquids supply of around 1.74 mb/d. This is unchanged m-o-m but much higher at 0.18 mb/d y-o-y. Continuous gains from Kashagan field – which reached 0.2 mb/d in July according to statements from operator Eni – and a rebound in volumes from the Karachaganak condensate field – offset a drop in production from Tengiz. Kashagan operating consortium NCOC started gas injection into the reservoir in August, according to the Deputy Energy Minister of Kazakhstan, for the purpose of raising oil output to at least 0.3 mb/d by the end of 2017 and triggering the field’s expansion to around 0.37 mb/d by the end of next year. Based on this plan, and despite keeping the quarterly production forecast unchanged at 1.68 mb/d, the forecast for Kazakhstan’s oil production in 2017 was revised up to 1.74 mb/d. However, production in the next year is likely to be more uncertain, as peak output in Kashagan is now expected to shift to 2019. Thus, the 2018 supply forecast was revised down by 0.03 mb/d to average 1.80 mb/d, indicating growth of 0.06 mb/d y-o-y.

China’s oil supply declined by 0.04 mb/d in July to 3.97 mb/d, including 3.83 mb/d of crude oil, according to data released by the Chinese National Bureau of Statistics. Crude oil production declined in 1Q17 and 2Q17 by 0.24 mb/d and 0.13 mb/d y-o-y, while China’s leading state companies PetroChina and Sinopec continued to restrain investment at the expense of crude production. For instance, PetroChina’s upstream spending in 2Q17 was down by 72% to $5 billion compared with the same quarter one year earlier. Hence, crude oil production for the company declined by 33% to 1.7 mb/d in the same period. In general, upstream investments in oil and gas projects have not seen sustained improvement so far this year, according to the latest report issued in July by the Ministry of Land and Resources. In 2016, approximately $30 billion was spent for exploration and development of oil and gas in China. However, compared with average oil supply output declines of 0.30 mb/d, or 6.8%, last year, output in 1H17 stood at 4.02 mb/d, 4.1% below 1H16 levels, indicating that a recovery in oil prices could help oil output rise.

Chinese crude oil output is forecast to decline by roughly 0.12 mb/d in 2017 and 0.13 mb/d in 2018.

OPEC NGLs and non-conventional oils
The forecast for OPEC NGLs and non-conventional liquids in 2017 was left unchanged, averaging 6.31 mb/d and representing growth of 0.17 mb/d. This follows last month’s upward revision of 90 tb/d following Equatorial Guinea joining OPEC. In 2018, due to a number of planned projects, growth of 0.18 mb/d y-o-y is anticipated, with average output of 6.49 mb/d. These projects are expected to be mainly in IR Iran and Saudi Arabia.

OPEC crude oil production
According to secondary sources, total OPEC-14 crude oil production averaged 32.76 mb/d in August, a decrease of 79 tb/d over the previous month. Crude oil output increased in Nigeria, while production showed declines in Libya, Gabon, Venezuela and Iraq.

World oil supply
Preliminary data indicate that the global oil supply decreased by 0.41 mb/d to average 96.75 mb/d in August 2017 compared with the previous month. Preliminary August supply data show a decrease in non-OPEC supply (including OPEC NGLs) by 0.33 mb/d to average 64.00 mb/d. This was mainly driven by Africa other, Brunei, Canada, Colombia, Congo, Ghana, Norway, OPEC NGLs and the US, which partially offset m-o-m declines in Azerbaijan, China, Mexico and the UK. OPEC crude oil production also declined by 0.08 mb/d in August, leading to a decrease in global oil output. The share of OPEC crude oil in total global production fell slightly by 0.1 pp to total 33.9% in August, compared with 33.8% in the previous month. Estimates are based on preliminary data from direct communication for non-OPEC supply, OPEC NGLs and non-conventional oil, while estimates for OPEC crude production are based on secondary sources.

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