The issue of China’s economic growth and whether it can maintain momentum in the coming years is critical to the course of the global demand for crude oil. Chinese oil imports are now the largest or close to the largest of any country in the world. As most industrial countries’ oil imports are now stagnant, China is seen as the major factor which could increase the demand for oil or at least maintain the level of prices in the next few years. Should Chinese demand fall off, oil prices could plummet down to $30 a barrel or less.  Currently world prices are in the mid-$40 range.

There is growing concern that China’s official number for growth of its GDP is based on political considerations rather than economic reality. China is reporting a 6.9% growth rate while many economists believe it is less than that and perhaps as low as 4%. The rapid growth of China’s economy over the last seven years accounted for about one-third of global economic growth. The Chinese are now making a concerted effort to transform their economy from one based on industrial production to a Western-style service economy.

In the North Sea, two of the largest independent oil explorers are predicting a further 10,000 jobs will be lost from the oil sector, indicating a growing acceptance that world crude oil prices are stuck in a prolonged slump. Since the fall of 2014, 5,500 people directly employed in the North Sea oil business have lost their jobs — 15% of the total workforce.

Poland will be buying crude oil for the first time from Saudi Arabia next month, a shipment that could mark the start of a new trade relationship and one that could undermine Poland’s reliance on Russian supplies.

OPEC’s official target for oil production is 30 million barrels per day.  However, the organisation has exceeded this figure for 16 consecutive months as it attempts to defend sales amid a global supply glut.

International oil company BP is working closing with China. The firm has agreed to supply liquefied natural gas (LNG) to China Huadian Corp. in a deal worth as much as $10 billion over two decades to supply electric power stations. BP will supply as much as 1 million metric tons of LNG annually to CHC. In addition, BP and China National Petroleum Corp., that country’s largest oil producer, have agreed to jointly explore and produce shale gas in China’s Sichuan basin.

Low crude oil prices is having a big impact on the largest supplier in Africa, Nigeria. Now the International Monetary Fund is pushing the West African nation to further devalue its currency amid uncertainty over the political and economic outlook. The naira has lost 25% of its value over the past year and the stock market is down 35% because of political uncertainty and the collapse in international oil prices. Oil provides most of the government’s revenues.

The glut of West African crude oil is moving to the US. Thirteen crude oil tankers with West African crude will dock in the US Gulf in October, up from four vessels in September.

Cuba plans to drill exploratory deepwater oil wells off its coast in the Gulf of Mexico by the end of 2016 or beginning of 2017 despite current low oil prices. Cuba-Petróleo will drill exploratory wells as deep as 7,000 meters.

Royal Dutch Shell has Shell been given permission by the Canadian province of Nova Scotia to start an exploratory drilling program in the Atlantic Ocean about 150 miles off the province’s coast. Nova Scotia estimates there may be up to 120 trillion cubic feet of natural gas and 8 billion barrels of crude oil offshore.

 

with h/t Tom Whipple

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