International Maritime Associates (IMA) is a firm of business consultants specializing in market analysis and strategic planning for companies in the marine and offshore sectors.
February 1, 2020Jim McCaul — Activity in the deepwater sector took a huge hit in the second half of last decade as a result of a global oil demand/supply imbalance, downturn in oil prices, hiatus in Petrobras production
February 14, 2019Jim McCaul — IMA/World Energy Reports has just completed a twelve month detailed assessment of the floating liquefaction and regasification market. The 150+ page study examines future market opportunities
February 12, 2019Jim McCaul — Floating production storage and offloading vessels (FPSOs) are by far the most popular type of floating production system. They account for two thirds of the oil/gas production floaters now
April 15, 2017Jim McCaul -- Orders for production floaters have finally begun to flow. The break came early this year when contracts for a production semi for use in the GOM and an FPSO for use off Malaysia were awarded.
December 12, 2016Jim McCaul -- Donald Trump’s presidential win and Republican sweep of the US government in November – along with OPEC’s oil production cuts in December -- have injected new dynamics into the US energy
The coronavirus crisis has upended the offshore oil and gas sector. We are seeing a repeat of the 2006/07 financial meltdown impact on the sector -- and the impact this time will be worse.
Oil demand has sharply fallen as the virus spread shuts down economic activity worldwide. Global oil demand is expected to fall 20% in April -- some estimates of the decline are as high as 35%. Brent is trading at $28 -- up from $25 at the beginning of April, but down 60% from early January.
In parallel to the virus spread, Saudi Arabia kicked off a full-fledged price war with Russia by flooding the market with oil to see who blinks first. The result -- an oil glut has been rapidly forming worldwide, especially in the US.
Tanker tracking shows 20 VLCCs heading toward the US Gulf that loaded in Saudi Arabia in March/early April. They are carrying 40 million barrels of crude -- 8 million bbls to discharge in April, 32 million bbls in May. These shipments will totally flood the US market, which was the intent of the Saudis. US oil prices have now dropped below $20 and local producers are unable to cover production costs.
US crude inventory (excluding crude oil in the Strategic Petroleum Reserve) during the past week increased by 19.2 million barrels from the previous week. This follows a 15.2 and 13.8 million barrel increase over the preceding two weeks. At 503.6 million barrels, US crude inventory is 6% above the five year average for this time of year. With oil demand down US refineries last week operated at only 69.1% of their operable capacity.
The Saudis appear to have greatly underestimated the harm they were inflicting on the market -- and themselves. Resentment to Saudi Arabia is building in the US as oil workers lose jobs at an unprecedented rate.
A meeting last week between OPEC and Russia to discuss production cuts resulted in a conditional agreement to significantly cut production. This was followed by a meeting on Sunday, which included G-20 countries, in which firm agreement was reached to collectively cut 9.7 mb/d from global crude supply.
But the supply cut agreement will not be enough to return the sector to normality. Until the virus spread is brought under control, no supply cut deal will be able to overcome the huge drop in oil demand. Demand destruction has been too great, the oil glut is now too big -- and the producers will cheat on the deal.
Meanwhile oil pricing will remain under pressure until the virus spread abates -- and market turmoil has forced field operators to defer investment plans.
Jim is the founder and manager of IMA, a consulting firm providing market analysis, competitive benchmarking and business planning support in the maritime and offshore sectors. Over the past 40 years IMA has performed more than 350 business consulting assignments for 170+ clients in 40+ countries.
One of the firm’s specialties is analyzing requirements for floating production systems. IMA has published more than 60 reports since 1996 analyzing this business sector and has been engaged by numerous clients to assist in analyzing specific market opportunities in the floating production sector.
Jim is also the co-founder of IMA/World Energy Reports, a New York based business intelligence service for the floating production supply chain.