Analysis by Dr. Nancy Yamaguchi
WTI crude prices topped the $49/b mark at closing yesterday, and prices today have hit peaks nearly at the $50/b level. Prices have trended up this week, opening higher for three consecutive days. Reports of stronger demand and restrained output have given renewed faith in the idea of a coming supply-demand balance, and prices have rallied in response. As noted earlier this week, the International Energy Agency (IEA) revised upward its forecast of global demand in 2017. OPEC compliance with the production cut agreement reportedly rose to 96% in August.
The Energy Information Administration (EIA) released supply and demand data for the week ended September 8. Domestic crude production staged a significant recovery after the losses caused by Hurricane Harvey. For the week ended September 1, crude production dropped by 749 kbpd, falling from 9530 kbpd to 8781 kbpd. For the current week ended September 8, production rebounded by 572 kbpd to 9353 kbpd.
Demand data is likely to show anomalies because of the hurricanes, with surges in fuel purchasing pre-hurricane and pre-evacuation, followed by cessation of demand in certain areas, with pent-up demand following. For the week ended September 1, apparent gasoline demand collapsed by 683 kbpd, dropping from 9846 kbpd to 9163 kbps. For the week ended September 8, apparent demand for gasoline rebounded by 456 kbpd.
The EIA reported another weekly drop in jet fuel demand, amounting to 148 kbpd. Distillate demand was flat, with a small decline of 6 kbpd.
Refinery crude runs dropped by 3253 kbpd during the week ended September 1, and they dropped by another 394 kbpd during the week ended September 8. However, a number of key refineries are coming back onstream, and refinery crude runs are expected to rise during the week ended September 15.
The EIA reported that 5.888 mmbbls of crude oil went into stockpiles during the week ended September 8. Gasoline stocks were drawn down by 8.428 mmbbls. Distillate inventories were drawn down by 3.215 mmbbls. The official inventory data was reasonably consistent with the data reported by America Petroleum Institute (API.) The API reportedly estimated that U.S. crude inventories rose by 6.181 mmbbls during the week ended September 8, while gasoline inventories were drawn down by 7.896 mmbbls and distillate inventories were drawn down by 1.805 mmbbls.
WTI crude opened at $49.31/b this session, a significant increase of $0.97 from yesterday’s opening. Currently this morning, WTI prices are $49.79/b, up by $0.48 since today’s opening. The daily price range has been $49.15-$49.95/b.