Skip to content
Oil and gas

From fossil to fuel: The global flow of oil and data used to track it

Published on by Scott Todd

The gas or petrol you pump into your vehicle and the oil you may use to heat your home goes on a long journey from its point of extraction to you. We paint a picture of the process and the data being managed and studied to make the oil supply chain flow.

The oil journey

Upstream activities involve several stages, including the identification and purchase or license of the land, securing access to drilling rigs and staff to operate them, and negotiating oil-field-services management. This is when exploration occurs and extraction begins. The success of this phase depends on the ability to find reserves and their quality and quantity, meaning: how good and plentiful they are.

The drilled, or extracted, crude is then ready for shipment and a transportation company is confirmed. The winner of that bid transports the shipment from its point of extraction to a destination point, during the midstream phase, where refinement then occurs. Midstream can also involve building pipelines to transport shipments. Success here depends on the volume of oil in contracts and pricing terms.

Refining crude is the beginning of the downstream process. Refinement takes various forms, as there are many different uses and byproducts of the original liquid. These include oil and gas, as well as items such as lubricants, fertilizers, consumer goods (e.g. plastics and tires) and even personal items, like cosmetics and petroleum jelly, to name a few. This phase involves the bringing to market of the end products and requires operational efficiency and an investment in sales and marketing.

The continuous transportation or flow of crude oil and gas is essential to ensure ongoing consumer access to the products on which we rely, and to businesses for reaping a return on their investment. Market analysts dedicated to tracking O&G flows and pricing provide essential information for managing the complex trade of oil globally.

The work of market analysts is primarily done in the midstream segment. It involves hedging a company’s exposure to oil and gas prices and speculating about the future market. In times of volatility, such as now, O&G companies can leverage their own capital to generate better returns by fixing or locking in a future price.

Tracking oil prices and flows

Oil prices are an important data set market analysts use. In February, oil was trading in a tight range, between $52 and $57 per barrel, as shown in Figures 1A and 1B. This was in large part due to the OPEC-nation’s commitment to a reduction in production and the speculation of a potential extension beyond OPEC’s initial six-month agreement.

Figures 1A and 1B: Crude Benchmark Prices and US Dollar Index vs. Brent

Crude Benchmark Prices and US Dollar Index vs. Brent

Source: Thomson Reuters Oil Research

Demand data is also essential. While oil demand increased in February over January, from 95.64 million barrels per day (bpd) to 96.02 million bpd, the expectation is that we will see a decline in supply in March, primarily due to refinery maintenance programs.

Shipment tracking and related data is another important piece of the overall industry view. Global crude shipments from OPEC fell by more than 1.5 million bpd in January compared to December, with sharp reductions in exports seen from Saudi Arabia, UAE, Kuwait and Iraq, as shown in Figures 2A, 2B and 2C. Given widespread skepticism over the accuracy of official production data, monitoring exports is increasingly being used to assess OPEC compliance to quotas.

Figure 2A: OPEC Crude Exports (February 2016 – February 2017)

OPEC Crude Exports (February 2016 – February 2017)
Source: Thomson Reuters Oil Research
Others: Algeria, Angola, Ecuador, Gabon, Libya and Qatar

Figure 2B: OPEC-Nation Crude Oil Exports (Feb 2017)

OPEC-Nation Crude Oil Exports (Feb 2017)
Source: Thomson Reuters Oil Research

Figure 2C: OPEC Crude Oil Export Recipients by Region (Feb 2017)

OPEC Crude Oil Export Recipients by Region (Feb 2017)
Source: Thomson Reuters Oil Research

Market sentiment quickly reversed at the start of March amid signs of rising inventories and higher shipments from OPEC. February’s crude exports from OPEC countries surged to 3-month highs, also shown in Figure 2A, in response to robust demand from Asia and Africa.

Conclusion

As consumers, we may take for granted the long journey oil and gas take before reaching our vehicle, home or community. And, it isn’t always obvious the many people involved in this process, such as the market analysts who monitor and assess O&G production, flows and pricing. This example begins to paint the picture of some of the data being managed and studied by market analysts, to provide real-time insight for business executives, commodity traders and others in the industry. Be on the lookout for future updates on oil flows and visit Thomson Reuters to learn more.

  • Facebook
  • Twitter
  • Linkedin
  • Google+
  • Email

More answers