US Crude Oil Reshaping International Crude Oil Flows Olivier Jakob, ojakob@petromatrix.com www.petromatrix.com
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WTI is the real price of crude oil Brent is the reality of the price of crude oil.
The two crude markets WTI: Free-market Efficient allocation of resources. If pricing differentials exist, then infrastructure will be developed. Trend of increasing production Brent: Ultimately it is the OPEC market. Supply is controlled by OPEC and price is dependent of OPEC policies Trend of decreasing production in the pricemaking benchmark
From the price being set by OPEC 2000: OPEC price band of 22 $/bbl to 28 $/bbl on basis of OPEC basket Below 22 $/bbl for 10 days or above 28 $/bbl for 20 days triggers production adjustments. Abandoned in early 2005.
World Oil Demand Y-O-Y Growth myn b/d (source: IEA) 3.5 3 2.5 2 1.5 1 0.5 0-0.5-1 -1.5 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Crude Oil lost to wars/strikes in OPEC countries (k bpd) 3,000 2,500 2,000 1,500 1,000 500 0 Jan-02 Jun-02 Nov-02 Apr-03 Sep-03 Feb-04 Jul-04 Dec-04 May-05 Oct-05 Mar-06 Aug-06 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12
to the price being set by the market Until end-december 2010: price of crude oil has to be set by the marginal cost of production. Deemed to be deep-offshore then Canadian sands 70-80 $/bbl floor King Abdullah, 2008/2009: fair price is 75 $/bbl or maybe 80 $/bbl.
and back to OPEC Since early 2011: price has to be set at a floor that allows budgetary requirements of OPEC nations facing civil pressure. More or less 100 $/bbl floor Targeting 100 $/bbl or 110 $/bbl?
There used to be only one benchmark WTI was the price maker. Had the most liquidity and Brent was also a WTI market due to North Sea shipments up the pipe to Padd2 Brent was being priced as a differential to WTI. Dubai set as a differential to Brent. World crudes could be linked to a WTI or Brent formula, WTI was the ultimate price maker
And then there were two With reduced flows from the US Gulf to Padd2, the arbitrage started to move to the US Gulf values Relationship between Brent and WTI has been broken. OPEC walks from WTI reference Passive investors have lost in the WTI contango, loosing appetite in WTI and favoring Brent since 2011 Increased calls that «WTI is disconnected» to the world.
-In early 2010, Petromatrix calls for Brent premium to WTI for 1Q2011 -But not to the 15 $/bbl+ -Would we have a Brent/WTI at 15 $/bbl if OPEC target was still 80 $/bbl?
Myth: US does not export crude oil. Versus Jan 2008 ( 000 bpd): 2,000 1,500 1,000 500 0 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12-500 -1,000-1,500 Product Exports Crude Oil Production
14,000 12,000 10,000 Myth: US does not export Natural Gas (US Coal Exports, thou short tons) 8,000 6,000 4,000 2,000 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
US crude prodn & imports vs Jan 2008 ( 000 b/d) 2,500 2,000 1,500 1,000 500 0-500 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12-1,000-1,500-2,000-2,500 Imports Production
IEA (OECD) outlook for US crude production growth ( 000 bpd) 900 800 700 600 500 400 300 200 100 0 2012 2013 Dec11 Dec12 Jul12 Jan13
US imports from Saudi Arabia ( 000 b/d) 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800
Imports from S.Arabia Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 140 120 100 80 60 40 20 0-20 OECD Europe OECD Asia US China
Iraq production increase ( 000 bpd) 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
US imports from Iraq ( 000 b/d) 800 700 600 500 400 300 200 100 0
Imports from Iraq Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 160 140 120 100 80 60 40 20 0-20 OECD Europe OECD Asia US China
Imports from Iran ( 000 bpd) 3,000 2,500 2,000 1,500 1,000 500 - Belgium France Greece Italy Netherlands Spain Turkey Japan South Korea China India Taiwan
US imports from Colombia ( 000 b/d) 600 500 400 300 200 100 0
Imports from Colombia Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 40 20 0-20 OECD Europe OECD Asia US China -40-60 -80
US imports from Brazil ( 000 b/d) 450 400 350 300 250 200 150 100 50 0
Imports from Brazil Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 100 50 0 OECD Europe OECD Asia US China -50-100 -150
US imports from Russia ( 000 b/d) 400 350 300 250 200 150 100 50 0
Imports from Russia Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 200 150 100 50 0-50 -100-150 -200-250 -300 OECD Europe OECD Asia US China
US imports from Algeria ( 000 b/d) 400 350 300 250 200 150 100 50 0
Imports from Algeria Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 30 20 10 0-10 OECD Europe OECD Asia US China -20-30 -40-50
US imports from Angola ( 000 b/d) 450 400 350 300 250 200 150 100 50 0
US imports from Angola ( 000 b/d) 250 200 150 100 50 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Padd1 Padd3 Padd5
Imports from Angola Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 150 100 50 0-50 OECD Europe OECD Asia US China -100-150 -200-250
US imports from Nigeria ( 000 b/d) 1200 1000 800 600 400 200 0
US imports from Nigeria ( 000 b/d) 700 600 500 400 300 200 100 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Padd1 Padd3
Imports from Nigeria Oct-Nov 2012 vs Oct-Nov 2011 ( 000 b/d) 350 300 250 200 150 100 50 0-50 -100-150 -200 OECD Europe OECD Asia US China
Increased Nigeria to Europe offset by FTA for European crude to S.Korea ( 000 bpd) 250 200 150 100 50 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Norway UK
Policy decisions on small flows but key benchmarks can have significant price impact
US crude imports 4 week avg to Feb 15 th 000 bpd vs year ago level Canada +350 2 534 Saudi Arabia -416 996 Mexico -75 865 Venezuela -82 745 Iraq +40 499 Nigeria -50 317 Kuwait 0 293 Colombia -120 271 Angola -84 245 Ecuador 60 216 Russia -151 81 Brazil -269 75 Norway -96 0 Algeria -89 0
US crude oil imports (excl. CAN, 000 bpd) 9,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5,000 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
US crude oil imports (excl. CAN) and China crude oil imports (vs Jan 2007, 000 bpd) 3,000 2,000 1,000 0-1,000 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13-2,000-3,000 US China
US crude oil imports (excl. CAN) and China crude oil imports ( 000 bpd) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 US Oct-09 Jan-10 Apr-10 China Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
US obligatory oil stocks in days of net imports (End-Nov, IEA) 180 170 160 150 140 130 120 110 100 2008 2009 2010 2011 2012
US Sweet SPR days of cover for USG imports of NIG+ALG+ANG+BRAZ 1,100 900 700 500 300 100-100