China oil slump seen joining US slide

iStock

Hong Kong - China’s falling oil output and sliding US production may help rebalance a market struggling to recover from the worst price crash in a generation, according to Standard Chartered.

Output from China, the world’s fifth-largest producer, will average 4.05 million barrels a day this year, down about 253 000 barrels a day from 2015, analysts at the bank including Nicholas Snowdon wrote in a research report. The Energy Information Administration last month trimmed its US crude production outlook for this year to 8.6 million barrels a day.

“China cannot rebalance the global oil market on its own, but China and the US together are doing most of this work,” the analysts wrote. “The swing from growth to decline in domestic output means that China’s net pull on the oil market will likely increase this year, despite slower demand growth.”

Brent crude, the global benchmark, has rallied about 60% from its 12-year low in January on supply disruptions ranging from pipeline attacks to field shutdowns. Prices were down 0.2% at $44.90 a barrel as of 8 a.m. in London.

Big 3 cuts

PetroChina, the country’s biggest producer, sees oil and gas output falling the first time in 17 years as it shuts high-cost fields that have “ no hope” of profits, Wang Dongjin, the company’s president, said in March. The company expects crude production this year at 924.7 million barrels, down 4.9%.

Cnooc sees oil and gas output slipping as much as 5.2% to as low as 470 million barrels of oil equivalent this year after it surged 15% in 2015. China Petroleum & Chemical, known as Sinopec, reported in January that oil and gas output fell for the first time in 16 years and that it will close high-cost fields.

China lags the US, Russia, Saudi Arabia and Canada in oil production, according to the International Energy Agency. The country’s National Energy Administration said last month that output will slide 6.9% to 200 million metric tons this year (about 4.01 million barrels a day).

“High costs, reduced capex and mounting decline rates in the mature fields that have supported China’s domestic output for decades have combined to pull output down,” the Standard Chartered analysts wrote in the report published Tuesday.

Record imports

China’s crude imports climbed to a record 7.34 million barrels a day in the first quarter, up 13% from the same period last year, as higher refining margin encouraged oil processors to boost purchases.

US output has fallen 13 of the last 14 weeks to 8.9 million barrels a day as April 22, extending its decline after last year reaching the highest in more than 40 years.

ZAR/USD
17.08
(-0.67)
ZAR/GBP
21.45
(-1.15)
ZAR/EUR
19.29
(-0.44)
ZAR/AUD
11.89
(-0.43)
ZAR/JPY
0.16
(-0.51)
Gold
1795.47
(+0.60)
Silver
18.24
(-0.05)
Platinum
840.00
(+2.49)
Brent Crude
43.07
(+0.70)
Palladium
1924.00
(+0.36)
All Share
55243.80
(+0.72)
Top 40
50922.32
(+0.83)
Financial 15
10086.99
(-0.47)
Industrial 25
76855.87
(+0.55)
Resource 10
52017.34
(+1.71)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1725 votes
I am taking a hit, but should be able to recover in the next year
23% - 2261 votes
My finances have been devastated
34% - 3375 votes
It's still too early to know what the full effect will be
25% - 2448 votes
Vote