The Organization of Petroleum Exporting Countries (OPEC), has said oil market recovery may take longer than projected as coronavirus infections continue to rise globally.
OPEC’s Secretary General Mohammed Barkindo, who said this on Monday, however assured that OPEC+ would “stay the course” in balancing the market.
The OPEC and allies including Russia made a record oil output cut in April as the pandemic hit demand. They are scheduled to increase output in January as part of a gradual easing of supply curbs.
Barkindo, asked at the virtual India Energy Forum by CERAWeek if the second wave of the virus required any changes to OPEC+ strategy, said hopes earlier this year of a demand rebound had been disappointed.
“We were hopeful the second half of 2020 would begin to see a recovery,” Barkindo said. “Unfortunately, both the economic growth and demand recovery remain anaemic at the moment due largely to the virus.”
We remain cautiously optimistic that the recovery will continue. It may take longer, maybe at lower levels, but we are determined to stay the course,” Barkindo added.
Russian President Vladimir Putin, speaking last Thursday, did not rule out extending the oil cuts for longer if market conditions warranted.
Meanwhile, OPEC in its Monthly Oil Market Report (MOMR) for the month of October projects a decline in 9.5 million barrels per day in 2020. This is in part due to the spike in covid-19 infections spreading across Europe and the United States.
World oil demand
In 2020, world oil demand is estimated to decline by 9.5 mb/d year-on-year, relatively unchanged from last month’s assessment, reaching a level of 90.3 mb/d. In the OECD, demand growth is revised slightly lower by around 0.06 mb/d in 2020. This downward revision accounts for lower expectations for transportation fuel consumption in the US and parts of Europe in 2H20 following a weak summer driving season, which has more than offset a less-than-expected decline in 1H20 data, due to steady petrochemical feedstock demand in the US and increased heating fuel restocking in Europe. In the non-OECD, oil demand in 2020 was adjusted slightly higher, by around 0.05 mb/d m-o-m, due to better-than-expected demand from China. In 2021, world oil demand is revised lower by 0.08 mb/d, compared to last month’s assessment, now forecasting a growth of 6.5 mb/d, reaching a level of 96.8 mb/d. This downward revision mainly reflects lower economic growth outlook for both the OECD and non-OECD regions, compared to last month’s forecast.
World Oil Supply
The non-OPEC liquids supply forecast in 2020 is revised up by 0.31 mb/d from the previous month’s
assessment, mostly due to a higher-than-expected recovery in US liquids production. Non-OPEC liquids
supply is now estimated to contract by 2.4 mb/d y-o-y, to average 62.8 mb/d. Oil supply in 2020 is forecast to decline mainly in Russia with 1.1 mb/d, US with 0.7 mb/d, Canada, Kazakhstan, Colombia, Malaysia, and Azerbaijan, while it is projected to grow in Norway, Brazil, China, Guyana and Australia. The non-OPEC liquids production forecast for 2021 is revised down by 0.11 mb/d, mainly for the US, and is now expected to grow by 0.9 mb/d, to average 63.67 mb/d. The main drivers for supply growth are expected to be the US with 0.3 mb/d, Canada, Brazil and Norway. The majority of this growth represents a recovery of production from 2020, rather than new projects. OPEC NGLs in 2020 are estimated to decline by 0.1 mb/d y-o-y, and forecast to grow by 0.1 mb/d y-o-y in 2021, to average 5.2 mb/d. OPEC crude oil production in September decreased by 0.05 mb/d, m-o-m, to average 24.11 mb/d, according to secondary sources.
The oil futures market
The Crude oil futures prices on both sides of the Atlantic moved sharply lower during September, falling m-o-m for the first time since April, with ICE Brent down 7.0% on a monthly average, while NYMEX WTI dropped 6.5%. Oil futures came under pressure during September, as market sentiment deteriorated on growing concerns about signs of slowing global oil demand recovery, which was exacerbated by spikes in COVID-19 infections in several regions, including India, the US and many European countries, which could prompt new tighter lockdown
measures and more limited mobility. The main forecasters revised down their global oil demand growth for this year. Meanwhile, investors were assessing rising global oil supply, including supply from OPEC and
participating non-OPEC producers in the DoC, and the gradual return of Libyan crude oil production in
September. Furthermore, depressed refining margins, high oil stock levels and refinery turnarounds that
resulted in reduced buying interest from refiners also weighed on the market, prompting concerns that a global excess of crude and refined products would delay a long-anticipated rebalancing of the market. Over the first half of September, oil prices fell by about 13% amid a sharp sell-off in equity markets and deteriorating market sentiment on bleak US job data, which added concerns of a slower recovery in the US economy and oil demand from the COVID-19 recession. Oil prices also fell as the hurricane Laura risk premium that supported oil prices temporarily in late August faded. Disappointing data from China reporting lower crude oil imports in August on a monthly basis and higher oil product exports, as well as a weekly EIA report showing a rise in US crude stocks in the week to 4 September after six consecutive weeks of declines added concerns about an oversupplied market and pressured prices lower.
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TGS adds to offshore Nigeria data with new coring project
TGS, a leading provider of multi-client geoscience data for exploration and production companies, have announced the recommencement of the geochemical coring project offshore Nigeria.
The initiative is part of an anomaly targeting program focusing on the previously completed analysis of multibeam and backscatter data. This survey is being conducted in conjunction with Nigerian joint venture partner TGS-PetroData.
The coring leg began on 15th October and completion is planned for late November. This coincides with an exciting time for the industry in Nigeria with significant progress being seen on the long-awaited Petroleum Industry Bill.
The project covers an area of approx. 82,000 sq kms offshore Nigeria and will incorporate 17 seabed heat flow measurements and 253 seabed cores whose location is based on multibeam and backscatter anomalies. These data are complemented by TGS’ NGRE19 2D seismic data reprocessed last year to take advantage of modern seismic imaging techniques. Once coring is concluded, geochemistry is undertaken in a world-class laboratory with preliminary results available daily and final reports ready for industry review in Q1 2021.
For Chief Executive Officer at TGS Kristian Johansen, “This multibeam and seismic coverage alongside coring and geochemical analysis will further de-risk the offshore region and speed up exploration decision-making in an area which is likely to see a growing level of licensing activity in the near future. With the progress of the Petroleum Industry Bill the opportunities to further explore offshore Nigeria have never been more appealing.”
This project is supported by industry funding.
Source: TGS
