2011: 'Odd year' for oil

In case you didn’t noticed, 2011 was “an odd year”—one of “volcanic change” that yet led to circumstances “conducive” to maintaining consistent oil prices, said Paul Horsnell, managing director of Commodities Research at Barclays Capital, London.

He said, “The contradiction of 2011 is that once the pattern of the key dynamics was set, we have found it a year that has enabled the maintenance of consistent price forecasts for global benchmarks. Stability in price dynamics has coincided with instability in the basic building blocks that help determine the main frameworks for the oil market.”

With the notable exception of West Texas Intermediate, benchmark crudes set record price averages last year, “in most cases well above $100/bbl,” Horsnell reported. The Organization of Petroleum Exporting Countries’ basket of benchmark crudes averaged above $100/bbl for 11 consecutive months and was expected to set a record average. On Jan. 3, OPEC reported an average basket price of $107.46/bbl for 2011, up from $77.45/bbl in 2010. It was the best year ever for OPEC revenues with record prices and record production, including NGLs.

“Despite the significant slowdown in demand growth in the second half of the year, global oil demand, too, is on track to reach a record high, even after allowing for delayed revisions to Organization for Economic Cooperation and Development demand. Meanwhile, although the absolute level of inventories is higher (in line with global oil demand), the rate of drawdown in stocks last year was near record levels,” Horsnell said.

Like most analysts, Horsnell expected a slowdown in world demand for crude compared with the exceptional growth rates of 2010, but demand growth weakened more than anticipated. As a result, Barclays Capital lowered its 2011 global demand growth forecast some 600,000 b/d as the European debt crisis intensified and global demand slowed. “In midyear the flow of data suggested a far more serious weakening was in place, but a stronger outturn in the second half kept the dynamics more positive,” he explained. “No doubt the Fukushima earthquake had a strong negative…effect on global manufacturing, while policymakers on both sides of the Atlantic struggled to maintain growth.” OECD oil demand weakened with higher oil prices and dragged the global growth profile lower.

Distillates outperform

However, Horsnell said, “We did expect the middle of the barrel to outperform, and that it did with élan. Record-high diesel demand, supported by extremely strong non-OECD demand for the middle of the barrel and robust internal trade in the OECD, was the key supportive factor for global demand this year, while gasoline languished in the face of high prices.”

He said, “Any disappointments on the demand side have on average been outweighed by disappointments on the supply side, and in particular the spectacular deceleration in non-OPEC supply after the first quarter started off on a strong note with non-OPEC supply in January increasing by almost 1 million b/d, continuing the momentum seen across the fourth quarter of 2010.” Despite strong growth in production of unconventional liquids, non-OPEC supply growth virtually ground to a halt. Horsnell blamed underperformance in the North Sea, technical issues in Brazil and Azerbaijan, decline rates in China, fires in Canada, strikes in Kazakhstan, and geopolitical disruptions in Sudan, Yemen, and Syria.

“The only bright spot has been the US where the momentum in oil shales has continued to tick higher, helping offset some of the weakness from the rest of the world,” he said.

Rather than becoming more proactive last year, Horsnell said, “OPEC was faced by an unprecedented event in the form of the Arab Spring, the greatest impact of which was to lose more than 450 million bbl of Libyan light, sweet, diesel-rich oil over the course of the year. OPEC was initially slow to react, and this was made worse by its meeting in June, which ended without any consensus or decision. However, part of the problem stemmed from the fact that the quality of the existing spare capacity was heavy and sour in nature, and hence to use it as a replacement for light, sweet crude was simply not fungible.”

He said, “Ultimately, trade flows had to adjust, with more North African crudes swinging into Europe and additional Middle Eastern oil heading towards Asia, but the adjustment was hardly instantaneous. Nonetheless, Saudi Arabia and a few other members such as UAE and Kuwait, which held some spare capacity, unilaterally increased output, with OPEC-12 production currently at a 3-year high above 30 million b/d.”

(Online Jan. 3, 2012; author's e-mail: samf@ogjonline.com)

Related Articles

Antitrust gambit shows why biofuel mandates must end

08/26/2013 With a ludicrous antitrust initiative, US senators from Iowa and Minnesota show why the federal Renewable Fuels Standard (RFS) needs repeal instead...

Energy consumption to escalate

07/30/2013 World energy consumption will jump 56% in the next 30 years, driven by growing demand in developing countries, the US Energy Information Administra...

US, Mexico energy trade in flux

05/28/2013 Energy trade between the US and Mexico is in flux with rising crude production in the US, falling production in Mexico, and rising Mexican demand f...

Foreign crude supply concentrated

04/29/2013 It’s no secret the jump in US oil production in recent years has dropped imports of foreign crude to the lowest It’s levels since 1997—down 1.3 mil...

Corn, ethanol prices squeeze profit

03/25/2013 Last summer, US prices for ethanol and corn reached such an imbalance that production costs exceeded revenue at relatively simple ethanol plants, t...

Working on the railroads

02/26/2013 The rapid increase of North American crude production has resulted in pipeline bottlenecks in some areas, forcing more reliance on rail transportat...

War, weather issues affect energy

01/28/2013 The fatal 4-day siege at the In Amenas gas production plant in eastern Algeria near the Libyan border that left 81 people dead “heightens concerns ...

Historic mistakes should guide US on LNG exports

01/11/2013

Political opposition to LNG exports by the US brings to mind monumental energy mistakes of the past.

2013 looks a lot like 2012

12/31/2012 New Year 2013 looks as though it will be much like the old one. There’s rioting in Egypt, confrontation with Iran, continued crisis in the Euro-zon...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected