This is the final iteration of The Oil Big Five for 2015, and it comes at the end of the month because December had so much oil news it was hard to find a break during the month to look ahead. But as per usual, we’re here to highlight a few key trends or news items that we feel are worth watching, for both the short amount of time left in 2015 as well as into the new year.
These are topics nominated by our knowledgeable editors and analysts around the world. Tell us what you think in the comments below – any topics we missed, or any outcomes you foresee from the topics below. Alternatively, share your thoughts on Twitter using the hashtag #oilbig5.
This is also the final planned blog post for 2015. We’ve expanded the writers and topics covered on The Barrel, and we’re extremely grateful to our readers for considering our posts, sharing and commenting. We wish everyone a very peaceful end to 2015 and a profitable 2016, and here are some items to mull over as the year wraps up:
1. US crude exports
The good thing about waiting to compile The Oil Big Five is that you get the chance to include news that breaks later in the month. The limits on US crude oil exports were lifted earlier this month as part of a massive US government spending bill, giving US producers unfettered access to global markets for the first time in decades. There are various questions raised by the deal: does this set a new approach to US energy policy, when US crude will actually hit the global market, and how current crude oil prices will affect exports. This is a topic that has made The Oil Big Five before, and no doubt it will crop up again—Enterprise said December 23 that Vitol is scheduled to load a cargo of US crude oil during the first week of 2016, and more companies will surely make use of the open access to markets.
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2. North Sea production
Production in the famously mature and declining North Sea region has finally picked up a bit, thanks to Lundin Petroleum’s Edvard Grieg oilfield offshore Norway starting up after years of preparation. The Grane grade, which one of our Platts editorial staff said “could be termed the heavy acidic bad boy of the North Sea crude quality spectrum,” got a quality and volume boost with the startup, and investment decisions that took place before the 2014 oil price crash are starting to bear fruit, however brief. The key BFOE grades rebounded to production over 1 million b/d for the first time in years, driven by improvement in Forties production. But with technical issues of an aging infrastructure always on the horizon, how long can this increase be sustained?
3. OPEC production
OPEC’s last meeting, which took place at the beginning of December, has been well covered in various places by Platts. Without rehashing the same news too much, before the meeting there had been speculation about whether the group would change its output levels, but in the end, OPEC declined to set any specific output levels. In the US, where there’s been a surge of crude production, the meeting left some wondering what it meant for domestic business. Perhaps the biggest thing to watch, though, is whether this meeting signals some kind of change in the philosophy behind OPEC. Is OPEC at a crossroads?
4. US refined product stockpiles
Earlier in the year we talked about Asian stockpiling ahead of winter, and seasonal shifts are well established in the world of oil. But in the US, a very warm start to winter is throwing a wrench in the works for some as stocks for various refined products keep growing. US Atlantic Coast ultra low sulfur heating oil differentials dropped to their lowest level ever on high regional stockpiles on December 2; warm weather meant that home heating demand was down. Propane stocks in the US kept breaking records in December, too, and US Atlantic Coast ULSD stocks keep growing. One Atlantic Coast based ULSD source told Platts, “You need 15 consecutive cold days to see a rise in ULSD and heating oil demand.” When it looks like warm weather will grace much of the East Coast over the long holiday weekend, when traders along the US Gulf Coast are struggling to place ULSD even as it slips below $1/gal, and when a gallon of diesel costs the same as something off the dollar menu at a fast-food restaurant, it raises the question of where US stocks could end up by the end of the winter.
5. Nigerian crude
This topic is making an appearance on The Barrel again as some Nigerian grades of crude oil reached 10-year lows in their differentials to Dated Brent. Grades like Forcados and Bonga were assessed at negative values on December 9, and high freight rates from West Africa to the UK-Continent are discouraging for long-haul FOB cargoes. Good refining margins for sour barrels at European refineries means Nigerian crude is passed up for other barrels, the US’ purchases have dropped off, and some of Nigeria’s own refineries are broken, leaving cargoes drifting back into the wider market. India did pick up more crudes as the overhang built and differentials began to slide, but not enough to prevent some grades like Qua Iboe and Bonny Light from hitting those 10-year lows. The country also expects its 2016 oil revenue to be lower than 2015 due to declining prices. One crude trader told Platts, “Nigeria hasn’t been this weak since the dinosaur age.” What will it take to make a lasting dent in the overhang of Nigerian crude?