Strong Demand, Tight Supply, Upward Price Pressure
- Crude oil supplies are being squeezed
- Oil demand reaches new record
- U.S. producers diverting funds from Exploration and Development
- Natural gas recovers
Sincerely,
Alan Levine, Chairman
Powerhouse
(202) 333-5380
The Matrix
Exploration and development spending are significant budgetary items for American upstream companies. But recent data show that E&D spending has fallen behind rewarding investors with corporate payouts for dividends and share buybacks.
Tight product supply and expectations of growth in global oil demand suggest a continuing need for crude oil supplies. OPEC and Russia have both used oil availability for political purposes, making global crude oil supply always problematical.
Even now, global availabilities are constricting. Inventories in developed countries are 115 million barrels less than their five-year average. Further reductions are expected for the rest of the rest of the year, perhaps by 1.7 million barrels daily.
A corporate policy of diverting funds from finding new oil may prove counterproductive in the event of reduced crude oil supply from established suppliers. Refilling the Strategic Petroleum Reserve is still unfinished. It would be another claimant for new supply.
There have been many reasons to believe that demand for oil has peaked. Demand collapsed during Covid-19. Working from home became important. Emerging concerns for the effects of climate change pushed supply toward renewables.
The reality has proven different. Notwithstanding the growth of alternative supply, the development of electric vehicles and greater efficiency, global demand has reached a new record.
The International Energy Agency put global demand at 103 million barrels daily in June. It expects even higher consumption in August. This reflects strong anticipated demand from China. Demand for air travel has boosted jet fuel consumption and power generation supported by surging Cooling Degree Days.
EIA anticipates a need for 29.8 million daily barrels from OPEC for the rest of the year. In July, the group provided 27.9 million barrels per day. An increase that large will almost certainly affect supply with bullish ramifications for price.
Supply/Demand Balances
Supply/demand data in the United States for the week ended August 18, 2023, were released by the Energy Information Administration.
Total commercial stocks of petroleum fell (⬇) 3.0 million barrels to 1.2628 billion barrels during the week ended August 18, 2023.
Commercial crude oil supplies in the United States were lower (⬇) by 6.1 million barrels from the previous report week to 433.5 million barrels.
Crude oil inventory changes by PAD District:
PADD 1: Down (⬇) 1.5 million barrels to 7.0 million barrels
PADD 2: Down (⬇) 3.3 million barrels to 114.1 million barrels
PADD 3: Unchanged (=) at 243.5 million barrels
PADD 4: Down (⬇) 0.3 million barrels at 23.7 million barrels
PADD 5: Down (⬇) 1.0 million barrels to 45.2 million barrels
Cushing, Oklahoma, inventories were down (⬇) 3.1 million barrels from the previous report week to 30.7 million barrels.
Domestic crude oil production was up (⬆) 100,000 barrels at 12.8 million barrels daily.
Crude oil imports averaged 6.933 million barrels per day, a daily decrease (⬇) of 225,000 barrels. Exports decreased (⬇) 341,000 barrels daily to 4.258 million barrels per day.
Refineries used 94.5% of capacity; 0.2 percentage points lower (⬇) than the previous report week.
Crude oil inputs to refineries increased (⬆) 30,000 barrels daily; there were 16.776 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, decreased (⬇) 44,000 barrels daily to 17.258 million barrels daily.
Total petroleum product inventories increased (⬆) by 3.2 million barrels from the previous report week, up to 829.3 million barrels.
Total product demand decreased (⬇) 498,000 barrels daily to 21.165 million barrels per day.
Gasoline stocks increased (⬆) 1.5 million barrels from the previous report week; total stocks are 217.6 million barrels.
Demand for gasoline increased (⬆) 59,000 barrels per day to 8.910 million barrels per day.
Distillate fuel oil stocks increased (⬆) 0.9 million barrels from the previous report week; distillate stocks are at 116.7 million barrels. EIA reported national distillate demand at 3.836 million barrels per day during the report week, an increase (⬆) of 188,000 barrels daily.
Propane stocks increased (⬆) by 1.7 million barrels from the previous report week to 92.3 million barrels. The report estimated current demand at 974,000 barrels per day, a decrease (⬇) of 270,000 barrels daily from the previous report week.
