Facts & Rumors # 568
September 21, 2024
China’s Rapid Slowdown Drives World’s Oil Demand Growth Downturn, IEA Says. WSJ
The IEA forecasts this year’s global demand to grow by 903,000 barrels a day from 970,000 previously, its second consecutive downward revision in two months
The Paris-based organization forecasts this year’s global demand to grow by 903,000 barrels a day from 970,000 barrels a day previously—marking its second consecutive downward revision in just two months—while growth estimates for next year were left broadly unchanged at 954,000 barrels a day. Total demand is seen at an average of 103 million barrels a day and 103.9 million barrels a day in the respective periods.
The IEA’s projections remain substantially lower than those of the Organization of the Petroleum Exporting Countries. The group of oil-producing countries slightly trimmed its forecast earlier this week, but still sees demand growth at a healthy 2.03 million barrels a day this year and 1.74 million barrels a day next year.
In the first half of this year, global demand growth continued to decelerate, with gains of 800,000 barrels a day on year, the lowest since 2020, according to the agency.
“The chief driver of this downturn is a rapidly slowing China,” the IEA said. In the world’s second-largest economy, consumption contracted for a fourth straight month in July by 280,000 barrels a day, compared with the roughly 1 million barrels a day average pace of growth over the year prior.
“The abrupt halt to Chinese oil demand growth since the start of the year is having a profound impact on oil markets,” the IEA said, citing the country’s prolonged real-estate slump and the rising share of electric vehicles.
In the full year, China’s oil demand is expected to expand by only 180,000 barrels a day. The slowdown in consumption is most apparent in industrial products such as naphtha and gasoil, with the IEA saying that the projected plateau of demand in the country over the medium term might now be ahead of schedule.
“With China already falling behind its forecast trend, other Asian countries will become increasingly indispensable to growth in oil demand,” the agency said. Meanwhile, the current state of U.S. demand is uncertain, and other advanced economies have also shown a mixed picture.
Thursday’s IEA report came after crude prices tanked last week on growing concerns over global demand and prospects of an oversupplied market next year. Weakening prices prompted OPEC and its allies to postpone their planned output hike by two months, but the move wasn’t enough to roll back steep price losses.
Brent crude currently trades around $71 a barrel, while the U.S. oil gauge, West Texas Intermediate, is around $68 a barrel. Futures regained slight ground on fears of lengthy production shutdowns of U.S. offshore oil and gas facilities due to Tropical Storm Francine, but widespread concerns over the demand outlook persist.
Global oil supply rose by 80,000 barrels a day in August, the IEA said, a much slower pace compared with the previous month due to production losses in Libya and maintenance works in Norway and Kazakhstan. Total supply is now seen at an average of 102.9 million barrels a day this year and 105 million barrels a day next year.
Non-OPEC+ countries are still set to lead global supply, with production expected to grow by 1.5 million barrels a day in 2024 and 2025, driven by the U.S., Guyana, Canada and Brazil. OPEC+ output is instead now expected to decline by 810,000 barrels a day and to rise by 540,000 barrels a day next year if voluntary cuts stay in place.
The cartel and its allies decided to postpone their plans to start unwinding voluntary cuts of 2.2 million barrels a day until the end of November, after which the curbs are due to be gradually phased out through December of next year. The group’s next meeting is scheduled for Oct. 2, with market watchers saying the cartel risks losing further market share if cuts remain in place, but that if it doesn’t take longer-term action to counter a global surplus, prices will weaken even further.
In August, crude output from OPEC+’s 22 member countries fell by 270,000 barrels a day to 41.46 million barrels a day, partly due to lower Libyan production and scheduled maintenance in Kazakhstan. Russia’s crude supply was down by 80,000 barrels a day to 9.11 million barrels a day in August, resulting in lower exports.
The Kremlin’s crude exports fell by 290,000 barrels a day last month to 7 million barrels a day, reaching their lowest since March 2021, while commercial revenue fell by $1.6 billion compared with the previous month to $15.3 billion, a level not seen since July of last year.
AI Driving Boom in NatGas. U.S. natural gas power is booming thanks to AI. Oil Price. U.S. power-generating companies are announcing plans for the highest volume of new natural gas-fired capacity in years as the AI boom is driving demand for electricity. Suring the first half of 2024, electricity-generating firms unveiled plans for the new gas-powered capacity equal to all capacity announced in 2020, according to data from Sierra Club cited by Bloomberg. Natural gas-fired electricity generation in the United States has jumped year-to-date compared to the same period last year, as total power demand rose with warmer temperatures and demand from data centers.
Chesapeake Pushes LNG to Asia. Chesapeake pushes to move 10% of U.S. shale gas into Asian markets. Hart Energy. Chesapeake Energy, whose merger with fellow U.S. E&P Southwestern Energy remains under review, is already looking overseas for its next move. The Oklahoma City-based company wants to send its natural gas, via LNG, into what it sees as a robust growth market in Asia, despite some political unknowns in the U.S.
More Drilling Under Salt Fork State Park, OH. Thanks, MDN. In February, the Ohio Oil & Gas Land Management Commission (OGLMC) met to award contracts to drill under (not on) several Ohio state parks, including 5,700 acres of the 20,000-acre Salt Fork State Park in Guernsey County. The contract for Salt Fork was awarded to Infinity Natural Resources. Then, in June, the OGLMC received a new nomination to drill under another 2,300 acres of Salt Fork State Park. And now, two more parcels have been nominated for drilling under (not on) the park, totaling an additional 884 acres.
FERC Gives Eagle LNG Another 5 Years. Thanks, MDN. In September 2019, the Federal Energy Regulatory Commission (FERC) gave its blessing to Eagle LNG to build a small LNG export facility project at a site on the St. Johns River in Jacksonville, Florida. Some of the gas that will feed it will come from the Marcellus/Utica. FERC’s blessing in September 2019 came with a deadline to build the facility by September 2024. In July, Eagle said it could not meet the deadline and asked FERC to extend it by another five years. Last week, FERC agreed to extend the project an extra five years.
AI Driving Resurgence of NatGas Power Plants. AI boom is driving a surprise resurgence of U.S. gas-fired power. Bloomberg. Energy companies in the US are planning new natural gas-fired power generation at the fastest pace in years, one of the clearest signals yet that fossil fuels are likely to have a longer runway than previously thought. From Florida to Oregon, utilities are racing to meet a surge in demand from power-hungry AI data centers, manufacturing facilities and electric vehicles.
LNG Demand Spotlight @ Gastech Conference. Low gas prices, LNG demand in spotlight at Gastech conference. Reuters. Top energy executives and ministers will meet in Houston this week for the annual Gastech conference, with U.S. markets in focus as booming liquefied natural gas (LNG) exports help wean Europe off Russian gas and as Asia moves away from coal. The U.S., once an importer of LNG, has surpassed Qatar as the world’s top exporter, with new technology allowing America’s shale producers to tap massive reserves.
August DUC Report. The number of drilled, but uncompleted wells in four of the US’s most prolific shale plays dropped more than 7% in August from a year ago, the latest federal data reveals.
The two plays with the least number of “DUCs” saw their year-over-year numbers fall, while the plays with the largest number of DUCs recorded increases, the Energy Information Administration reported.
In its monthly Short-Term Energy Outlook (STEO), EIA reported 2,288 DUCs in Appalachia (the Marcellus and Utica Shale plays), Bakken, Eagle Ford and Permian plays, down 174 wells from August 2023’s 2,462 total. The latest total also was down 34 wells from July.
Appalachia and the Permian saw increases in DUCs from a year ago, with Appalachia showing a 62-well, 8.7% increase, to 776 from 714.
The Permian reported a 46-well, 5.5%, jump, to 876 DUCs from 830 a year ago. Both plays were down from July 2024, by seven and 12 DUCs, respectively.
The Bakken and Eagle Ford plays each reported a year-over-year decrease in the number of August DUCs. The Bakken total fell 151 wells, 31.9%, to 313 from 444, while the Eagle Ford Shale play recorded a year-over-year DUCs decrease by 131, or 29.5%, to 313 from 444.
Compared to the previous month, the number of DUCs in the Bakken and Eagle Ford were down 12 and three wells, respectively, EIA’s latest STEO reported.
PA Permits September 9, to September 18, 2024
County Township E&P Companies
1. Greene Jackson EQT
2. Greene Jackson EQT
3. Greene Jackson EQT
4. Greene Jackson EQT
5. Greene Jackson EQT
6. Greene Jackson EQT
OH September 7, 2024 to September 14, 2024
County Township E&P Companies
1. No New Permits
WV Permits September 9, to September 13, 2024
1. Monongalia Northeast Nat. Res.
2. Wetzel Antero
3. Wetzel Antero
4. Wetzel Antero
5. Wetzel Antero
