2019 “One of Warmest Years” says NOAA

  1. El Niño made official by NOAA
  2. Energy interests look to use weather protection
  3. OPEC+ plans production cuts
  4. Natural gas storage withdrawals lag 5-year average by 18 per cent

Al pic 2009_cropped

Sincerely, Alan Levine Chairman of Powerhouse
(202) 333-5380
 
 
 

The Matrix

 

According to NOAA,

The El Nino phenomenon and its counterpart, La Nina (where tropical Pacific water is cooler than normal) are the main sources of year-to-year variability in weather and climate for many areas of the world. El Nino and La Nina tend to alternate in an irregular cycle, which is often referred to as the ENSO cycle.  El Nino episodes tend to:

  • Develop during the Northern Hemisphere spring season
  • Occur every 3-5 years
  • Usually last for 9-12 months

The current El Niño is not considered to be very powerful, but it could nonetheless make the southern U.S. wetter than normal. NOAA believes that “this event may help push the planet toward one of its warmest years on record in 2019.” There are also factors that could cause El Niño to persist into the winter of 2020.

Oil dealers with exposure to weather impacts on their bottom line should consider managing the risk of a warm winter with weather protection strategies.

The outlook for oil prices has been bullish in recent months.

Concerns that overseas crude oil producers would reduce output in support of prices have been reflected in a flat to higher price profile. OPEC and a group of non-OPEC producers have generally agreed to cut production. This combination has been dubbed OPEC+.

OPEC and a group of non-OPEC producers have generally agreed to cut production. This combination has been dubbed OPEC+.

OPEC itself announced January production cuts of nearly 800,000 barrels per day. This moved output to 30.81 million barrels per day. However, Russia, a member of the OPEC+ group, has not yet delivered on its promised production cuts. In addition, U.S. sanctions have disrupted Venezuelan exports.

The counterpoise between bullish production control by OPEC+ and bearish El Niño could also lead to a volatile oil market this year.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending February 8, 2019 were released by the Energy Information Administration.

Total commercial stocks of petroleum increased 3.6 million barrels during the week ending February 8, 2019.

There were builds in stocks of gasoline, K-jet fuel, distillates, residual fuel oil, and propane. There were draws in stocks of fuel ethanol and other oils.

Commercial crude oil supplies in the United States increased 3.6 million barrels from the previous report week to 450.8 million barrels.

Crude oil supplies increased in three of the five PAD Districts. PADD 3 (Gulf Coast) stocks rose 1.7 million barrels, PADD 4 (Rockies) stocks grew by 1.5 million barrels, and PADD 5 (West Coast) stocks advanced 1.7 million barrels. PADD 2 (Midwest) crude oil stocks fell 0.2 million barrels. Crude oil stocks at PADD 1 (East Coast) stocks were unchanged from the previous report week.

Supply/demand data in the United States for the week ending February 8, 2019 were released by the Energy Information Administration.

Total commercial stocks of petroleum increased 3.6 million barrels during the week ending February 8, 2019.

There were builds in stocks of gasoline, K-jet fuel, distillates, residual fuel oil, and propane. There were draws in stocks of fuel ethanol and other oils.

Commercial crude oil supplies in the United States increased 3.6 million barrels from the previous report week to 450.8 million barrels.

Crude oil supplies increased in three of the five PAD Districts. PADD 3 (Gulf Coast) stocks rose 1.7 million barrels, PADD 4 (Rockies) stocks grew by 1.5 million barrels, and PADD 5 (West Coast) stocks advanced 1.7 million barrels. PADD 2 (Midwest) crude oil stocks fell 0.2 million barrels. Crude oil stocks at PADD 1 (East Coast) stocks were unchanged from the previous report week.
Cushing, Oklahoma inventories decreased 1.0 million barrels from the previous report week to 41.6 million barrels.

Domestic crude oil production was unchanged from the previous report week at 11.9 million barrels per day.

Crude oil imports averaged 6.210 million barrels per day, a daily decrease of 936,000 barrels per day. Exports fell 506,000 barrels daily to 2.364 million barrels per day.

Refineries used 85.9 per cent of capacity, a decrease of 4.8 percentage points from the previous report week.

Crude oil inputs to refineries decreased 865,000 barrels daily; there were 15.768 million barrels per day of crude oil run to facilities.

Gross inputs, which include blending stocks, decreased 875,000 barrels daily to 15.989 million barrels daily.

Total petroleum product inventories rose 2.9 million barrels from the previous report week.

Gasoline stocks increased 0.4 million barrels from the previous report week; total stocks are 258.3 million barrels.

Demand for gasoline decreased 425,000 barrels per day to 8.648 million barrels per day.

Total product demand decreased 2.723 million barrels daily to 19.114 million barrels per day.

Distillate fuel oil stocks increased 1.2 barrels from the previous report week; distillate stocks are at 140.2 million barrels. National distillate demand was reported at 3.767 million barrels per day during the report week. This was a weekly decrease of 906,000 barrels daily.

Propane stocks increased 0.7 million barrels from the previous report week; propane stock are 58.2 million barrels. Current demand is estimated at 1.375 million barrels per day, a decrease of 610,000 barrels daily from the previous report week.

 

Natural Gas

According to the Energy Information Administration:

Net withdrawals from [natural gas] storage totaled 78 Bcf for the week ending February 8, compared with the five-year (2014–18) average net withdrawals of 160 Bcf and last year’s net withdrawals of 183 Bcf during the same week. Working gas stocks totaled 1,882 Bcf, which is 333 Bcf lower than the five-year average and 30 Bcf lower than last year at this time.

The average rate of net withdrawals from storage is 18% lower than the five-year average so far in the withdrawal season (November through March). If the rate of withdrawals from storage matched the five-year average of 11.3 Bcf/d for the remainder of the withdrawal season, total inventories would be 1,303 Bcf on March 31, which is 333 Bcf lower than the five-year average of 1,636 Bcf for that time of year.

 

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