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Light oil set to flood global market

RT | August 3, 2019

According to the report, the US accounted for 88 percent of this growth in global oil production, while OPEC recorded a production decline overall, on the back of US sanctions against Iran and Venezuela, which took off a combined 800,000 bpd from the cartel’s production in 2018.

While the US became the world’s largest oil producer last year thanks to shale and found a place among the top ten oil exporters in the world, it changed the blend mix on global markets, Eni said in its report. Thanks to shale, the portion of light sweet crudes on international markets increased to more than 20 percent. At the same time, because of sanctions against Venezuela and declining production in Mexico, the portion of medium sour crudes fell below 40 percent of the total for the first time ever.

This change in crude oil grade availability is changing the dynamics in prices, too. Earlier this year, the prices of some heavy crude grades touched a premium to lighter grades on concerns about a heavy crude supply crunch resulting from sanctions and OPEC cuts: most OPEC members reduced their heavier crude production in favor of light and sweet grades used to produce gasoline.

This supply crunch helped US exports: in early June, Reuters reported that as many as six Very Large Crude Carriers were waiting to load medium sour crude from the Gulf of Mexico for export markets. At the same time, Gulf Coast refiners struggled with an excess of light crude produced from the shale plays nearby: the Permian and the Eagle Ford.

Interestingly enough, despite the looming new emissions rules of the International Maritime Organization that will go into effect next January, Eni reported that the global production of medium sour crude, which has a higher sulfur content than light sweet crudes, increased last year to come to account for 11.8 percent of the total from 9.9 percent a year earlier. At the same time, total sweet crude production inched down to 35.6 percent of the total from 36.3 percent in 2017.

Amid these changing patterns of production, demand for crude oil last year continued to grow despite the flurry of climate emergency declarations prompted by protests and demands by environmental organizations for governments to do more about climate change. According to Eni, global oil demand rose by 1.4 million barrels daily, with Asia—and specifically China and India—unsurprisingly leading the way. The two largest economies on the continent accounted for half of that demand growth. At the same time, in increasingly renewable Europe, oil demand remained virtually unchanged from a year earlier.

Refining capacity also increased last year, with Asia once again leading the way: as much as 75 percent of the new global refining capacity of 1 million bpd was built there, the Italian supermajor said. This year, more new refining capacity is expected, especially in China: new additions of almost 900,000 bpd are expected this year from the current 15 million bpd.

August 3, 2019 - Posted by | Economics | , , ,

4 Comments »

  1. Pretty technical for me, but fairly understandable.

    (Who/what is “…the Italian supermajor”? — the cited “Eni”?)

    (I guess I also don’t understand the last-paragraph “Refining capacity….” Does that, as I presume, relate to the refining of *any* crude oil, whether “light oil,” “light sweet crude,” “medium sour crude,” “heavy crude,” “medium sour crude”…? — and thus “Refining capacity” is a macro term?)

    (At another blog last night, I attempted to ask, with my focus on Iran, “What is the status of natural gas these days…many [35?] years ago I read that Iran’s real energy/economic future rested on its massively huge deposits of clean-burning, [relatively] easily accessible and liquifiable natural gas. I think it had the largest proven reserves of natural gas on the planet. Has that assessment changed?” I was obviously trying to get to the point “How does natural gas, and its utility, fit into the equation of today’s fossil-fuel industry?”)

    Comment by roberthstiver | August 3, 2019 | Reply

    • Australia has recently become the World’s largest exporter of Natural Gas, overtaking Qatar.

      Comment by Brian Harry, Australia | August 3, 2019 | Reply

      • How interesting! Had no idea — Go Australia!

        Comment by roberthstiver | August 3, 2019 | Reply

  2. Put sanctions on a competitor to hog the market for yourself – NEAT TRICK.

    Comment by GGH | August 3, 2019 | Reply


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