SMM News: at the end of 2015, the United States lifted a 40-year ban on crude oil exports. Since then, US crude oil exports have increased sharply, mainly due to changes brought about by the explosive growth of shale oil production. These shale oil have been subject to pipeline restrictions for a long time. A large number of shale oil remain in inland production areas, and with the continuous improvement of pipelines and harbor infrastructure, the net import of crude oil in the United States has shown a downward trend. At present, crude oil exports remain at 3 million barrels per day, which is much higher than Iran's current production of 700000 barrels per day (Iran's highest output is only 3.8 million barrels per day, now down to about 2.3 million barrels per day). Crude has been in a bear market since 2014, and it seems difficult to break through $80 a barrel, the root cause of which remains that the rise in US shale oil production has constrained oil prices' highs. This forces OPEC+ countries to continue to cut production, which seems to have been cutting since the first production reduction agreement at the end of 2016, and it is difficult for OPEC+ to stop cutting production, because once it stops cutting production, it means that increasing production will lead to a collapse in oil prices. This is because the 3 million barrels per day share of US exports has already grabbed some of the global market, resulting in OPEC+ has been in a state of meat cutting compromise.
Us crude oil exports to India have grown rapidly and exports to China have fallen like a cliff
Where on earth has a lot of shale oil gone in the United States? According to EIA data, the US exports mainly to Canada and Mexico are the largest, followed by most to Asia, and there is no significant increase in exports to Europe, with only a small increase in the amount of crude oil exported to the UK. In Asia, the share of crude oil exported to China has fallen at a cliff level since June 2018, reaching a peak of 800000 barrels per day. It rebounded slightly at the end of 2018 and has remained stable at about 160000 barrels per day in the near future. Exports to India have skyrocketed, with total exports reaching 21 million barrels, or about 700000 barrels a day, in May, accounting for about 23 per cent of total US crude exports. Exports to Japan and South Korea are also rising slightly. On the whole, most of the shale oil in the United States has gone to Asia, mainly India, Japan and South Korea. At present, it seems that the crude oil market share in Asia has been occupied by the United States. In addition to China, China's main sources of crude oil imports are mainly Russia, Saudi Arabia and many other countries. The supply of crude oil in Europe is still dominated by OPEC and Russia. The United States accounts for the share of light crude oil in the United States, mainly in the United States.
Crude oil imports from the United States continued to decline, crude oil imports from Saudi Arabia decreased, and Canada remained stable.
Since 2010, the net import of crude oil in the United States has continued to decline. At present, the net import of crude oil is about 4 million barrels per day, and there is still a downward trend. The main imported crude oil is still dominated by Canadian oil sands, mainly to increase profits by blending light crude oil into different products in the United States. Venezuelan heavy oil has been imported before, but Venezuelan crude oil imports have been almost zero because of political factors. Crude oil imports from Saudi Arabia have also continued to decline, on the one hand as a result of the reduction in OPEC production, and on the other hand, the United States' own demand for crude oil in the Middle East has also continued to decline.
The United States exports crude oil mainly through the Gulf of Mexico, and its largest shale oil producing area is not far from here, and there are also quite a lot of pipeline infrastructure. Before that, most of the Permian shale oil was transported to the Cushing region, but now it is mainly transported to the Gulf region. Here, with the continuous improvement of VLCC and other pipelines and port facilities, there is still great potential to increase production in the future. In particular, the increase in the volume of 2 million barrels per day in the third quarter of this year is bound to have a certain impact on the global crude oil market. Green areas are mainly imported Canadian oil sands. Imports and exports from other regions remained stable.
The average production capacity of shale oil increased, the decline of inventory wells replaced the decline of the number of active drilling rigs, and the crude oil production continued to grow.
Since the outbreak of the shale oil revolution in the United States, crude oil production in the United States has risen to 12.2 million barrels per day in 2019 and now ranks first in the world. Recently, the number of active drilling rigs in the United States has dropped to about 780. the highest number of active drilling rigs in 2014 was about 1600, about twice as high as it is now. At that time, however, the level of production was only 9.5 million barrels per day. This shows that the production capacity of single drilling wells in the United States has increased, especially in the two shale oil producing areas of Bakken and Eagle stand. The number of active drilling rigs in Bakken has remained stable since 2014, but production has continued to grow, rising from 400 barrels per day in 2014 to 1400 barrels per day today. Average production capacity increased 3.5 times. The number of active drilling rigs in the Eagle stand area has also remained stable, but the average production capacity has also risen to 1300 barrels per day, up from a peak of 2000 barrels per day in 2016. In both areas, the number of drills is basically stable, there is no need to increase the number of active rigs, and the output can be increased.
According to the latest data from Baker Hughes, the recent decline in the number of active drilling rigs is actually caused by the decline in the number of Permian drilling rigs, and the shale oil production in the area is declining rapidly, so it is necessary to continue to increase the number of drilling rigs. Average production is also at a high growth stage, just one step from the maximum average production capacity of 750 barrels per day in 2016.
From the situation of inventory wells, the inventory wells in Bakken and Yingting areas are declining, and the number of drilled wells remains stable, so it also shows that it does not need too many active drilling rigs to maintain high production growth. In terms of quantity, Bakken still has 700 inventory wells and more than 1400 hawk stalls. It is worth noting that when the oil price is above $50 / barrel, the upstream of the region does not need much investment to form a large amount of production.
Permian storage wells have been on the rise, with about 3971 recently, much higher in number than the other two shale oil producing areas, where inventories have been growing almost all the time since 2014. There is no downward trend at all. The possibility that so many stockpiled wells will not be completed is that they may be empty or few wells and may not form industrial oil flows, but that is unlikely. Permian is recognized as the largest shale oil basin, oil layer distribution series is many, but very thin, but each well should be able to have a certain economic profit. The second reason may be that oil prices are too low and completion is not cost-effective, which is unlikely, because oil prices rose to $80 a barrel last year and inventory wells have yet to see a downward trend. Therefore, we believe that the most likely cause is the pipeline problem, and the pipeline facilities have been lagging behind the Permian production increase. This can also be seen from the Miland inland spread, which is the largest when oil prices rise high and the smallest when oil prices are low. Therefore, if the pipeline is opened, freight will also be reduced, so that a large amount of crude oil from the well in stock can be released, which will have a great impact on the global crude oil market. At the end of the third quarter of this year, there was an increase in pipeline traffic of 2 million barrels per day, and once all transport exports are exported, it is difficult to imagine the pressure on oil prices. So OPEC+ 's July meeting on production cuts is crucial. Of course, recent geopolitical events can support oil prices, but it does not necessarily change the pattern of global crude oil supply and demand.
Founder medium term Futures: Xu Yuanqiang of Energy and Chemical Industry Group
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