17 Named Storms Likely for 2021

  1. Hurricane season may be officially expanded
  2. 2020 experienced 30 named storms
  3. Low probability of an El Nino this season
  4. Natural gas demand likely to fall through 2022

Al pic 2009_cropped

Alan Levine—Chairman, Powerhouse
(202) 333-5380

 

 

The Matrix

Weather is among the most important fundamentals shaping the expectations of oil price. The weather includes rain/snowfall, heating/cooling degree days and hurricanes. Hurricanes are part of the annual tropical cyclone season in the Northern Hemisphere. They follow a traditional pattern from June 1 through November 30. Dynamic changes in weather patterns could change the dates of the hurricane season. Seven years out of the past decade, for example, have had hurricanes before the June 1 official season start.

A cottage industry of hurricane watchers typically provides springtime estimates of the number and intensity of storms. Colorado State University has released its forecast for the 2021 season. The university forecasts 17 named storms, of which eight are expected to be hurricanes. There are likely to be four major hurricanes among them. An average year sees 12 named storms, six hurricanes and three major hurricanes. (These averages are scheduled to be revised later this year.)

There were 30 named storms last year. CSU has projected “above average” performance in each of the past six years. A resurgent economy with increased fuel demand could create a much more bullish situation going forward.

One of the elements that underlie this projection has to do with sea surface temperatures. A warmer ocean (1-3 degrees Celsius above early April normal) tends to favor hurricane conditions.

One effect of so many 2020 events was reliance on a second group of hurricane names. These names included letters from the Greek alphabet. The World Meteorological Organization (WMO) is charged with managing the names of hurricanes. WMO has determined that Greek letters will no longer be used for this purpose. It appears to create a distraction from communicating hazard and storm warnings.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ended March 26, 2021, were released by the Energy Information Administration.

Total commercial stocks of petroleum rose by 2.3 million barrels during the week ended March 26, 2021.

Commercial crude oil supplies in the United States decreased by 3.5 million barrels from the previous report week to 498.3 million barrels.

Crude oil inventory changes by PAD District:

PADD 1: Down 0.4 to 8.3 million barrels

PADD 2: Down 1.2 million barrels to 128.2 million barrels

PADD 3: Down 4.1 million barrels to 290.3 million barrels

PADD 4: Plus 0.1 million barrels to 23.1 million barrels

PADD 5: Plus 2.1 million barrels to 48.2 million barrels

 

Cushing, Oklahoma, inventories were down 0.8 million barrels from the previous report week to 46.3 million barrels.

Domestic crude oil production was down 200,000 barrels daily from the previous report week to 10.9 million barrels daily.

Crude oil imports averaged 6.264 million barrels per day, a daily increase of 119,000 barrels. Exports increased 260,000 barrels daily to 3.434 million barrels per day.

Refineries used 84.0% of capacity, up 0.1% from the previous report week.

Crude oil inputs to refineries increased 103,000 barrels daily; there were 15.044 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 26,000 barrels daily to 15.044 million barrels daily.

Total petroleum product inventories rose 5.8 million barrels from the previous report week.

Gasoline stocks rose 4.0 from the previous report week; total stocks are 234.6 million barrels.

Demand for gasoline fell 109,000 barrels per day to 8.781 million barrels per day.

Total product demand decreased 1.077 million barrels daily to 19.236 million barrels per day.

Distillate fuel oil stocks rose 1.5 million barrels from the previous report week; distillate stocks are at 145.5 million barrels. EIA reported national distillate demand at 3.664 million barrels per day during the report week, a decrease of 449,000 barrels daily.

Propane stocks rose 0.3 million barrels from the previous report week; propane stocks rose to 39.6 million barrels. The report estimated current demand at 1.659 million barrels per day, a decrease of 18,000 barrels daily from the previous report week.

 

Natural Gas

The Energy Information Administration is projecting a decline in natural gas consumption through 2022. EIA points to fewer heating degree days being generated. The agency also noted that less economic activity associated with the COVID-19 pandemic reduced demand, too.

Natural gas demand topped 2019 at 85.2Bcf/d. It has since fallen 3.2 Bcf/d. Gas prices have been at relatively low levels, making gas more attractive with coal and renewables. The loss in demand is likely to come from power generation.

According to the EIA:

The net [natural gas] injections into storage totaled 20 Bcf for the week ended April 2, compared with the five-year (2016–2021) average net injections of 8 Bcf and last year’s net injections of 30 Bcf during the same week. Working natural gas stocks totaled 1,784 Bcf, which is 24 Bcf lower than the five-year average and 235 Bcf lower than last year at this time.

 

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