Actual Oil Production and Expectations Diverge

  1. Crude oil marks a new U.S. record
  2. Oil demand approaches new U.S. record
  3. Russian participation in deeper OPEC+ cuts uncertain
  4. U.S. natural gas in storage shows first withdrawal this season

Al pic 2009_cropped

Alan Levine, Chairman of Powerhouse

The Matrix

Crude oil production in the United States reached 12.9 million barrels daily in the week ending November 22, 2019. This record output was long-anticipated, on the way to 13+ million barrels per day.

All the jawboning about shale oil growth slowing in 2020 has not gained traction in actual markets. Expectations of lower domestic demand have not yet eventuated. Demand reached 21.1 million barrels daily, close to a record too.

Petroleum Products Supplied – 4-week average 1990 – 2019 Source: EIA

Market realities challenge concerns that a glut of petroleum inventory will develop in the United States next year. The EIA chart below shows domestic stocks falling to 1.268 billion barrels from a recent high in June.

Strong demand and tighter supply challenge projections of softer prices in 2020. They also work against the idea that non-OPEC+ supply growth could frustrate the efforts of Saudi Arabia to support prices.

OPEC has developed a market expectation of a 70,000 barrel per day surplus. If United States oil demand continues at current levels of activity, this may not come to pass, supporting prices next year.

Russia, the principal “plus” in OPEC+, remains a production wild card. The country is ostensibly a crude oil production cutter. Problems associated with winter shut-ins, discussed last week, could limit the extent to which Russia participates in further supply reductions. Russia’s November output reportedly was 11.24 million barrels daily. This level means that Russia cut production by 68 percent of its agreed amount.

Crude & Petroleum Products Supplied – 4-week average 1990 – 2019 Source: EIA

Market support has come from events reported in non-OPEC countries as well. Kazakhstan lost more than 200,000 barrels daily. Libyan output lost 70,000 barrels per day for a few days because of airstrikes. Baker Hughes reported a three rig cut in the United States. The total rig count is now down 25 percent from last November’s peak.


Supply/Demand Balances

Supply/demand data in the United States for the week ending Nov. 22, 2019, were released by the Energy Information Administration.

Total commercial stocks of petroleum rose by 0.1 million barrels during the week ending Nov. 22, 2019.

Commercial crude oil supplies in the United States increased by 1.6 million barrels from the previous report week to 452.0 million barrels.

Crude oil inventory changes by PAD District:
PADD 1: Plus 0.6 million barrels to 11.3 million barrels
PADD 2: Down 0.6 million barrels to 130.9 million barrels
PADD 3: Plus 0.8 million barrels to 232.6 million barrels
PADD 4: Down 0.4 million barrels to 24.4 million barrels
PADD 5: Plus 1.2 million barrels to 52.8 million barrels

Cushing, Oklahoma inventories fell 0.1 million barrels from the previous report week to 44.1 million barrels.

Domestic crude oil production rose 100,000 barrels per day from the previous report week to 12.9 million barrels daily.

Crude oil imports averaged 6.190 million barrels per day, a daily increase of 217,000 barrels. Exports rose 453,000 barrels daily to 3.480 million barrels per day.

Refineries used 89.3 percent of capacity, down 0.2% from the previous report week.

Crude oil inputs to refineries decreased 101,000 barrels daily; there were 16.334 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 32,000 barrels daily to reach 16.797 million barrels daily.

Total petroleum product inventories fell 1.5 million barrels from the previous report week.

Gasoline stocks increased 5.1 million barrels daily from the previous report week; total stocks are 226.0 million barrels.

Demand for gasoline rose 12,000 barrels per day to 9.204 million barrels per day.

Total product demand decreased 125,000 barrels daily to 21.106 million barrels per day.

Distillate fuel oil stocks increased 0.7 million barrels from the previous report week; distillate stocks are at 116.4 million barrels. EIA reported national distillate demand at 4.393 million barrels per day during the report week, an increase of 70,000 barrels daily.

Propane stocks decreased 0.7 million barrels from the previous report week; propane stocks are 93.5 million barrels. The report estimated current demand at 1.239 barrels per day, a decrease of 155,000 barrels daily from the previous report week.


Natural Gas

According to the Energy Information Administration:

Working gas in storage was 3,610 Bcf as of Friday, November 22, 2019, according to EIA estimates. This represents a net decrease of 28 Bcf from the previous week. Stocks were 548 Bcf higher than last year at this time and 31 Bcf below the five-year average of 3,641 Bcf. At 3,610 Bcf, total working gas is within the five-year historical range.


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