US LNG exports become zero

Liquefied natural gas exports by the United States have declined to nearly zero. The U.S. has been a net LNG importer, while the nation is re-exporting exceeded LNG cargoes. But the change in the LNG trade structure has become remarkably.

LNG imports had increased in the U.S. in line with the rising natural gas consumption during the first half of 2000s. However, surging domestic gas production due to the shale revolution has oppressed LNG imports after 2010.

Since LNG prices are two-three times higher than pipeline supplied natural gas in the U.S., demand for LNG is shrinking. Average monthly LNG imports was 35.9 billion cubic feet in 2010 but slipped to 14.6 bcf in 2012. The average import figures have declined to 8.6 bcf in the first eight months in 2013.

Monthly volume of re-export LNG has also decreased from 5.4 bcf in 2010 to 2.4 bcf in 2012. The average in the first eight months in 2013 was only 15 million cf.

The change in the U.S. LNG trade structure seems to be the final phase toward the really net exporting country.

The U.S. government is aggressively giving approval of LNG exports to countries that have not signed on the Free Trade Agreement. Five LNG export projects have been granted approval. Four of the five projects were approved after May this year. Total supply capacity of the five projects is 7.8 bcf per day, or 58 million metric tonnes per year.

Sabine Pass project in Louisiana that was the first approved in 2011 is scheduled to start shipping of 2.2 bcf/d LNG in late 2015. Four other approved projects are also expected to start operations in 2017 or later.

Further 29 projects are under review by the Department of Energy. Total supply capacity of 34 projects are estimated at 34.1 bcf/d or 2,560 million tonnes per year. The total volume of globally traded LNG during 2012 was 31.7 bcf/d. The U.S. will have more supply capacity than it in early 2020s.

Oil demand forecast for China is declining

China has been the world's largest fossil fuel importer, since the Unites States is reducing energy imports following the shale revolution. China is recognized as the biggest engine of the growth in global petroleum consumption over the past several years. However, long term outlooks against the nation's oil demand are downgrading. It might suggest a change of the situation.

The latest outlooks of the global petroleum demand until 2025 was downgraded from the previous forecast in the World Oil Outlooks issued by the Organization of the Petroleum Exporting Countries. Meanwhile, forecasts against 2030 and later were upgraded.
Basically, oil demand in advanced nations were downward revised throughout the entire period, while demand in developing countries were upward revised. But Chinese demand was downgraded broadly unlike with other developing nations.

On the other hand, forecasts against growth of Chinese petroleum demand during the two decades until 2035 was wider than the previous year's prediction. It shows that the downward revision against the relatively clear forecasts of near future was deeper than the ambiguous prediction of far future.

In the long term, a core of the growth of oil demand is likely to shift from China to India and Southeast Asia etc.

Chinese crude oil demand rises towards year-end

Chinese refineries processed 9.71 million barrels per day of crude oil in October, according to the data released by the National Bureau of Statistics. It was 3.1% higher than a year earlier and 2.9% increased from a month ago. Although crude oil processing in China slipped from a year ago level in September, it rebounded to the highest level since March.

 Meanwhile, China's crude oil imports in October fell 13.8% on year to 4.82 million bpd, according to the customs data. Since net crude oil imports in the month was 4.80 million bpd, the gap between the amount of processing was 4.91 million bpd. The shortage of supply was filled up by domestic production and the supply from inventories. Domestic crude oil production in China was averaged at 4.16 million bpd during the first nine months of 2013, meanwhile, crude oil stock in the country had increased by 11% during August and September.

The Chinese government announced that the country's industry production index rose 10.3 on year in October, it was the third consecutive double digits of year-on-year increase. Electricity generation in the nation rose 8.4% on year, automobile production surged by 25.5% from a year ago and ethylene output rose 16.9% on year. Those figures suggest a steady petroleum demand in China.

Petroleum inventories in China have a tendency that the crude oil stock hits the peak during the third quarter and the petroleum products stock sinks to the annual bottom in the same period. To the contrary, the inventory of crude oil falls to the bottom in the first quarter and the products stock rises to the annual highest level in the same period.

If the similar circulation will be repeated in the near future, crude oil processing in China could increase towards Q1 of 2014, and inventories of petroleum products are likely to rise. However, the petroleum products stock level in Q3 of this year was 6.1% higher than a year ago, it was a much larger increase than the crude oil stock level that was only 2.4% higher from the last year. A slower than expected consumption of petroleum products during the first nine months of this year might be caused such situation.

Chinese refineries increased their crude oil processing to above the 10 million bpd level during November 2012 and February 2013. Chinese industries seemed to decorate the strong economic growth at the beginning of the new Xi Jinping's administration. If Chinese refineries try to increase their crude oil processing at higher than the previous year's level in the coming several months, the already high petroleum product stock might surge to the critical level. Chinese oil companies could suffer the significant write-down if crude oil prices fall further.

Supply disruptions do not support crude oil market

Recently Reuters reported its survey that 12 members of the Organization of Petroleum Exporting Countries produced 29.9 million barrels per day of crude oil in October. It was the lowest output since October 2011.  Beside this survey, other estimates by different media also have showed low OPEC productions.

A supply disruption from Libya due to labour disputes and a slower than expected recovery in Iraq that reduced supply in September due to repairs at its shipment facilities were seen as the main reasons of the low OPEC production.

The following table shows the latest forecasts of the world demand and supply of petroleum issued by the International Energy Agency, OPEC and the U.S. Energy Information Administration.

Since IEA and OPEC don't provide forecasts for OPEC crude oil production figures, differences between the global demand and the supply excluding OPEC crude oil are seen as the necessary volume of OPEC crude oil.

Necessary volumes of OPEC crude oil will remain below the 30 million bpd level between the fourth quarter of 2013 and the end of 2014, according to the IEA's prediction. Therefore, even the lowest estimation of OPEC production in October by media exceeds the necessary volume. The global petroleum market is slightly oversupply.

Meanwhile, OPEC predicts that its members' necessary crude oil output in the 4Q of 2013 at 30.49 million bpd. If the actual production in October stayed at about 30 million bpd, the global supply is in a little bit shortage.

EIA only provides forecasts for future OPEC crude oil production, but the figures seem to be too small compared to actual output in the last few quarters. If the actual output in October was at about 30 million bpd, the global petroleum supply and demand could be balanced rather than a shortage of 630,000 bpd as EIA expected.

Despite OPEC and EIA expect tight supply and demand situation in the world petroleum market, recent crude oil prices have been weaker. Although crude oil output in Libya has decreased by more than a million bpd from the production level through the first half of this year, it does not support the market well.

Crude oil supply disruption from Libya triggered the surge in the crude oil market in 2011. However, a balance of petroleum supply and demand in the North America was about 7 million bpd at that time. The region had imported that much petroleum from the overseas. But the shortage have been shrinked to below 4 million bpd due to the shale revolution. Petroleum imports in the North America region are expected to decrease below 2.5 million bpd in late 2014.

More than 3 million bpd of crude oil from the Middle East and Africa has lost the North American market and spilled out towards the other markets. Thus the necessary of OPEC crude oil has been decreasing. Supply disruptions in Libya and Nigeria no longer are strong supportive factors for the crude oil market.