- Down 10%, Mexico Oil Reserves Gone in 9 Years Without New Finds
Mexico’s existing oil reserves are dwindling so fast the country could go dry within nine years without new discoveries.
That’s the message from the National Hydrocarbons Commission, which said Friday that the reserves fell 10.6 percent to 9.16 billion barrels in 2016, from 10.24 billion barrels a year earlier. Once the world’s third largest crude producer, Mexico’s proven reserves have declined 34 percent since 2013.
The decline in proven reserves is driven by record-low drilling activity the last three years, according to CNH Commissioner Hector Acosta. State-owned producer Petroleos Mexicanos drilled 21 wells last year, a record low, after averaging 31 per year since 2010.
“If there isn’t drilling, it is going to be difficult to incorporate new finds,” Acosta said. “The production figures and indicators that we are observing, tell us that there are flaws in the drilling activities being carried out by Pemex.”
The diminished production comes from a combination of reduced investment and the continued maturation of fields, said Cesar Alejandro Mar, Adjunct Director of Reserves. He set 8.9 years as a time frame for the reserves to run out if no new exploration occurs.
Pemex, meanwhile, said in an e-mailed statement that it added 684 million barrels of probable crude to the reserves last year, and “will continue working to increase reserves and restitution rates to higher levels.”
Mexico ended Pemex’s production monopoly in 2013 to let private operators develop oil in the country for the first time since the 1930s. Production is set to fall below 2 million daily barrels this year, the lowest levels since 1980, Pemex has said. Overall, crude production has declined every year since 2004.
Given increased crude development activity anticipated in the deep waters of the Gulf of Mexico by private producers, the country’s production is forecast to climb to 3.4 million barrels a day by 2040, according to a report by the International Energy Agency.
Italian producer Eni SpA, which won rights to develop a Gulf of Mexico field in 2015, recorded the country’s offshore find by a foreign company in more than seven decades on March 23.
“Mexico isn’t the only country that has seen its reserves diminished during a difficult time for the industry worldwide,” said Juan Carlos Zepeda, a CNH Commissioner, when the numbers were released. “International oil companies are just now starting to return to an improved investment rhythm.”
Oil Prices Decline on Rising India COVID-19 Cases, U.S Inflation Concerns
Global oil prices extended a decline on Friday following a 3 percent drop on Thursday as coronavirus cases rose in India, one of the world’s largest oil consumers.
Brent crude oil, against which Nigerian oil is priced, declined by 35 cents or 0.5 percent to $66.70 a barrel at 5 am Nigerian time on Tuesday while the U.S West Texas Intermediate (WTI) fell by 28 cents or 0.4 percent to $63.54 per barrel.
“The commodity super cycle rally just hit a hard stop and the energy market doesn’t know what to make of Wall Street’s fixation over inflation and the slow flattening of the curve in India,” said Edward Moya, senior market analyst at OANDA.
“The crude demand story is still upbeat for the second half of the year and that should prevent any significant dips in oil prices,” he added.
Prices dropped over a series of key economic data that stoke inflation concerns and forced experts to start thinking the Federal Reserve could raise interest rates to curb the surge in inflation.
An increase in interest rates typically boosts the U.S. dollar, which in turn pressures oil prices because it makes crude oil more expensive for holders of other currencies.
This coupled with the fact that India, the world’s third-largest oil consumer, recorded more than 4,000 COVID-19 deaths for a second straight day on Thursday, dragged on the oil outlook in the near term.
Brent Crude Rises to $69 on IEA Report
Oil prices rose after the release of the International Energy Agency’s (IEA) closely-watched Oil Market Report, with WTI Crude trading at above $66 a barrel and Brent Crude surpassing the $69 per barrel mark.
Prices jumped even though the agency revised down its full-year 2021 oil demand growth forecast by 270,000 barrels per day (bpd) from last month’s assessment, expecting now demand to rise by 5.4 million bpd. The downward revision was due to weaker consumption in Europe and North America in the first quarter and expectations of 630,000 bpd lower demand in the second quarter due to India’s COVID crisis.
The excess oil inventories of the past year have been all but depleted, and a strong demand rebound in the second half this year could lead to even steeper stock draws, the IEA said yesterday, keeping an upbeat forecast of global oil demand despite the weaker-than-expected first half of 2021.
However, the upbeat outlook for the second half of the year remains unchanged, as vaccination campaigns expand and the pandemic largely comes under control, the IEA said.
Moreover, the global oil glut that was hanging over the market for more than a year is now gone, the agency said.
“After nearly a year of robust supply restraint from OPEC+, bloated world oil inventories that built up during last year’s COVID-19 demand shock have returned to more normal levels,” the IEA said in its report.
In March, industry stocks in the developed economies fell by 25 million barrels to 2.951 billion barrels, reducing the overhang versus the five-year average to only 1.7 million barrels, and stocks continued to fall in April.
“Draws had been almost inevitable as easing mobility restrictions in the United States and Europe, robust industrial activity and coronavirus vaccinations set the stage for a steady rebound in fuel demand while OPEC+ pumped far below the call on its crude,” the IEA said.
The market looks oversupplied in May, but stock draws are set to resume as early as June and accelerate later this year. Under the current OPEC+ policy, oil supply will not catch up fast enough, with a jump in demand expected in the second half, according to the IEA. As vaccination rates rise and mobility restrictions ease, global oil demand is set to soar from 93.1 million bpd in the first quarter of 2021 to 99.6 million bpd by the end of the year.
OPEC Expects Increase In Global Oil Demand Raises Members’ Forecast on Crude Supply
The Organisation of Petroleum Exporting Countries (OPEC) yesterday lifted its forecast on its members’ crude this year by over 200,000 bpd and now expects demand for its own crude to average 27.65mn bpd in 2021.
This is almost 5.2mn bpd higher than last year and around 2.7mn b/d higher than an earlier estimate of the group’s April production.
According to the highlights of the organisation’s latest Monthly Oil Market Report (MOMR), OPEC crude is projected to rise from 26.48 million bpd in the second quarter to 28.7 million bpd in the third and 29.54 million bpd in the fourth quarter of the year.
The report also indicated a fall in Nigeria’s crude production from 1.477 bpd in February to 1.473, a difference of just about 4,000 bpd before rising again in April to 1.548 million bpd, to add 75,000 bpd last month.
OPEC stated that its upward revision of members’ crude was underpinned by a downgrade in the group’s forecast for non-OPEC supply, which it now expects to grow by 700,000 bpd to 63.6mn b/d against last month’s report’s projection of a 930,000 bpd rise to 63.83mn bpd.
The oil cartel projected that US crude output would drop by 280,000 bpd this year, compared with its previous forecast for a 70,000 bpd decline.
On the demand side, OPEC kept its overall forecast unchanged from last month’s MOMR, stressing that it expects global oil demand to grow by 5.95 million bpd to 96.46 million bpd this year, partly reversing last year’s 9.48mn bpd drop.
Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing month-on-month by 1.7 percent and 1 percent, respectively.
On the global economic projections, the cartel said stimulus measures in the US and accelerating recovery in Asian economies might continue supporting the global economic growth forecast for 2021, now revised up by 0.1 percent to reach 5.5 percent year-on-year.
This comes after a 3.5 percent year-on-year contraction estimated for the global economy in 2020.
However, global economic growth for 2021 remains clouded by uncertainties including, but not limited to the spread of COVID-19 variants and the speed of the global vaccine rollout, OPEC stated.
“World oil demand is assumed to have dropped by 9.5 mb/d in 2020, unchanged from last month’s assessment, now estimated to have reached 90.5 mb/d for the year. For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d,” it said.
The report listed the main drivers for supply growth in 2021 to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d year-on-year.
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