The Oil Adequacy Index measures shifting conditions in the global oil market each week. The EIU harnesses real-time intelligence on crude oil output from OPEC, Russia and the US, and sets this against market-leading forecasts for global oil consumption, providing an early indicator of the adequacy of global oil supplies.
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- Saudi exports recover as facilities are repaired
- Iranian exports fall by one-third week on week
- US production reaches another record high
Supplies to the global oil market increased substantially in the week ending (w/e) October 4th, more than offsetting a seasonal increase in the level of global oil demand. As a result, the Oil Adequacy Index rose to a value of 64.4.
Saudi Arabia's seaborne crude oil exports made a partial recovery this week, rising by 4.7%, following three consecutive weeks of declines. Saudi's exports are now at the very bottom edge of the average range that CargoMetrics has observed in recent months. As repairs are finalised, we expect its seaborne crude exports to climb back toward the middle of its average weekly range.
Iran's seaborne crude exports fell by nearly one-third week on week. Just one very large crude carrier (VLCC) shipment was loaded in the w/e October 4th. We expect Iran's exports to make a partial recovery in the w/e October 11th, as that particular week's exports are unaffected by the alleged missile strikes to an NTIC tanker reported by the Iranian authorities. The country's exports will remain volatile in the coming months as geopolitical tensions remain high, but the market appears to have largely priced this in.
Overall, seaborne crude oil exports from OPEC and Russia rose by 5.8% week on week. This was complemented by another rise in US oil production, which reached an all-time high of 12.6m barrels/day, ensuring that the oil market remains comfortably supplied.
Supplies to the global oil market were comfortable in the week ending (w/e) September 27th, pushing the Oil Adequacy Index up to 51. A value above the neutral baseline of 50 implies that supplies grew more quickly than demand. Saudi Arabia’s exports fell noticeably week on week, but the country’s efforts to dip into its considerable reserves helped to avoid a more significant disruption to exports.Saudi Arabia's seaborne crude oil exports fell by 10.6% week on week as the country was forced to delay loadings, cut refinery output at domestic units and switch oil grades. The kingdom has managed to bring production levels back to about 10m b/d after drone strikes claimed by Houthi rebels in Yemen knocked out around 5.7m barrels of production capacity on September 14th.Saudi officials had said that they expect to restore full operations at the affected sites, the Abqaiq processing facility and the Khurais oil field, by end-September. Saudi has been meeting its export commitments out of its stocks, though some customers have been asked to take heavier grades of oil. This has raised questions about Saudi’s ability to process oil fast enough to meet its export commitments, as repairs continue at the Abqaiq facilityOPEC registered a 3.3% jump in seaborne exports week on week, though Russia saw a week-on-week drop of 6.5%. However, with US crude production still hovering at nearly 87m barrels/week, the global oil market remains comfortably supplied overall.
Supplies to the global oil market contracted in the week ending (w/e) September 20th, while global demand held steady, pushing the Oil Adequacy Index down to 43.3. A value below the neutral baseline of 50 implies that supplies contracted. Saudi Arabia's exports dipped only marginally this week, as the kingdom dipped into its stocks to avoid disruption to the market.
Saudi Arabia's seaborne crude oil exports fell by just 0.8% week on week despite drone strikes knocking out about 5.7m barrels of production capacity on September 14th. Saudi officials have said that they expect to restore full operations at the affected sites, the Abqaiq processing facility and the Khurais oil field, by end-September, and recent media reports indicate that they are on track to meet that target after the attack, which was claimed by Houthi rebels in Yemen.
Nonetheless, it is likely that the impact of the temporary outages will become more evident in Saudi export data in the coming two-to-three weeks, as the strain on existing supplies and logistical difficulties take a toll. Interestingly, this week's stable report from Saudi follows a large drop, of 14%, in the previous week, ending September 13th. However, that drop followed two weeks of strong export increases, which had pushed the volume of Saudi's crude oil exports the very top end of Saudi's typical export range over the last 18 months.
However, Saudi's ability to reach into existing supplies will help to ensure that the market remains amply supplied. We expect Iran to avoid a direct military conflict with either Saudi Arabia or the US. Despite the recent spike in tensions, this remains the most likely outcome. After more than a year of punishing US sanctions, Iran is ill equipped to fight (and perhaps more importantly , to fund) and expensive foreign conflict.
The Oil Adequacy Index rose to 50.4 in the week ending (w/e) September 13th, just marginally over the neutral 50-point baseline. Supplies from OPEC producers increased slightly week on week, including from Iran, helping to offset a 14% drop in weekly exports from Saudi Arabia. Next week's index reading is likely to be more volatile, however, as the impact of the Abqaiq strikes starts to show up in the shipping data collected by CargoMetrics.
It is unclear what caused the 14% drop in Saudi Arabia's seaborne crude oil exports in the w/e September 13th, but the full impact of the drone strikes by Iran-backed Houthi rebels--which knocked out half of Saudi's total oil production capacity--will become apparent in the w/e September 20th. Saudi officials have said that they will increase exports from stocks, which could help to mitigate the effect on global oil prices. The shipping activity that CargoMetrics observes next week will allow us to better assess this impact.
Despite this sharp drop in Saudi seaborne crude oil exports, overall exports from OPEC countries rose by 1.4% week on week, supported by strong export growth in Algeria (31.5%), Angola (38.4%), Iraq (6%) and Iran (5.4%). Iran loaded two separate very large crude carrier (VLCC) shipments in the w/e September 13th. However, as in recent weeks, its shipments have become increasingly difficult to track, as ships are keeping their transponders off for even longer periods of time. They may be headed toward China, as may shipments have in the last six months; however, they have yet to reach a strategic passage that would require them to broadcast their position.
Every Friday, our analysts provide insight on the week’s index value, explaining what the change means for global oil supply and demand. This weekly insight is just a snapshot of the in-depth market analysis provided if you subscribe to the service.
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CargoMetrics collects and analyses real-time satellite and terrestrial sensor data on global tanker loadings. Leveraging advances in big data in a patented platform that integrates dozens of data sources and makes trillions of computations each day to track a global fleet of over 120,000 vessels, CargoMetrics produces a weekly measure of seaborne crude oil and condensate exports from 15 OPEC countries and Russia, eight to ten weeks ahead of official published data. These seaborne flows represent approximately 95% of total OPEC and Russian crude oil and condensate exports.
The Oil Adequacy Index measures the net change week on week in real oil supplies and forecast global oil consumption.
On the supply side, the Index derives a proxy for global oil supplies by harnessing CargoMetrics's intelligence on the volume of crude oil and natural gas condensates that are loaded onto tankers by OPEC countries and Russia. CargoMetrics’s data is generated from a platform that produces real-time intelligence on global maritime trade using proprietary algorithms that have been vetted against shipping manifests and other reliable but significantly lagged public data sources.
A historical regression shows that OPEC exports have consistently accounted for 80% of its total crude production, providing a proxy for overall supplies from the bloc.
The supply proxy also includes crude oil production data from the US, published weekly by the US Energy Information Administration (EIA). The total supply proxy therefore includes seaborne exports (to the global market) and US crude production; a historical regression has shown that this proxy consistently accounts for around 40% of total global oil production, when compared with historical data from the International Energy Agency (IEA).
This supply proxy is then indexed against supplies in first week of January 2012 (Base = 100), the week that CargoMetric's OPEC + Russia data series began. We therefore measure the total level of supplies on the global market relative to those at the start of the Index period. We measure week-on-week shifts in this indexed supply volume.
On the consumption side, the Index measures weekly changes in The EIU's market-leading forecast for global oil consumption. Based on historical data on total crude oil consumption from the IEA, The EIU forecasts country- and regional-level trends in oil consumption over five years, based on in-house forecasts for national and regional economic growth, seasonal variations in oil demand, and the shifting energy intensity of GDP growth in key economies such as the US, the euro zone and China. Weekly consumption values are also indexed against that of the first week of January 2012, for consistency.
The Oil Adequacy Index then measures the net change in the global supply and demand indices, and applies this to a 50-point baseline. A score >50 implies that the global oil market is more amply supplied (due to higher production, lower consumption, or both). A score of 50 implies no change from the previous week. A score <50 implies that that the oil market has tightened (due to lower production, higher consumption, or both).
To mark the launch of The Oil Adequacy Index, this report provides analysis on the latest trends in a fast-changing global oil market. It examines the potential risks to unexpected shifts in global supply levels, as well as concerns around global oil consumption.
In this webinar, Cailin Birch, Global Economist, discusses changing trends in the global oil market, using data taken from our newest product, The Oil Adequacy Index.