Oil Price Setback Not Tied to Petroleum Fundamentals

  1. ULSD price falls after $0.43 rally
  2. Decline not tied to supply/demand fundamentals
  3. Analysts raise crude oil price forecast to $100
  4. Natural gas consumption falls


Al pic 2009_cropped

Alan Levine—Chairman, Powerhouse

(202) 333-5380


The Matrix

ULSD’s bullish fever broke—or at least setback—last week. Prices had rallied nearly $0.43 in twelve consecutive sessions from Jan. 3, 2022, ($2.36) to Jan. 19, ($2.79.) This unbroken twelve-session streak was reportedly a record. The downturn was inevitable; a matter of time, top-heaviness, major turns in demand or supply in the oil sector.

Market fundamentals did not appear to be the cause. The U.S. Petroleum Balance Sheet for the week ended Jan. 14, 2022, showed little impressive change. Heating fuels, heating oil, and propane, reported weekly demand gains of 807,000 barrels per day and 689,000 daily barrels respectively, and this during a period of significant weather in the Northern States. Other demand changes were unremarkable.

Supply factors, similarly, were little changed. Domestic production remained at 11.7 million barrels per day. Net imports gained only 20,000 barrels daily. Total stocks fell only 1.5% during the week.

Global supply remains a concern and last week’s price setback may well end soon as such matters continue to burden the outlook. Powerhouse has followed the challenges facing OPEC+, the ongoing conflict in Libya, reduction in global inventories, and Middle East unrest back in the news.

Some financial analysts have raised price forecasts again. Goldman Sachs now projects $100 for Brent in the third quarter. The Bank lists a lower-than-expected impact on demand from the Omicron variant along with the problems mentioned above. Specifically, it does not argue that running out of oil is a concern. “Shale resources are still large and elastic.”

OPEC+ compliance remains a challenge to crude availability. The group reported that December production cuts rose to 122% of quota, reflecting the struggle some member states are having in raising output. Again, Nigeria and Angola were unable to meet their production obligations. (November OPEC+ supply cuts were 117% of quota.)


Supply/Demand Balances

Supply/demand data in the United States for the week ended Jan. 14, 2022, were released by the Energy Information Administration.

Total commercial stocks of petroleum fell 1.5 million barrels during the week ended Jan. 14, 2022.

Commercial crude oil supplies in the United States increased by 0.5 million barrels from the previous report week to 413.8 million barrels.

Crude oil inventory changes by PAD District:

PADD 1: Down 0.7 million barrels to 6.7 million barrels

PADD 2: Down 0.6 million barrels to 113.7 million barrels

PADD 3: Plus 2.2 million barrels to 222.5 million barrels

PADD 4: Plus 0.1 million barrels to 23.3 million barrels

PADD 5: Down 0.5 million barrels to 47.6 million barrels


Cushing, Oklahoma, inventories were down 1.3 million barrels from the previous report week to 33.5 million barrels.

Domestic crude oil production was UNCH from the previous report week at 11.7 million barrels daily.

Crude oil imports averaged 6.745 million barrels per day, a daily increase of 675,000 barrels. Exports increased 655,000 barrels daily to 2.610 million barrels per day.

Refineries used 88.1% of capacity; 0.3 percentage points lower from the previous report week.

Crude oil inputs to refineries decreased 120,000 barrels daily; there were 15.453 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 61,000 barrels daily to 16.029 million barrels daily.

Total petroleum product inventories fell 2 million barrels from the previous report week.

Gasoline stocks increased 5.9 million barrels from the previous report week; total stocks are 246.6 million barrels.

Demand for gasoline rose by 317,000 barrels per day to 8.224 million barrels per day.

Total product demand increased 1,086,000 barrels daily to 21.915 million barrels per day.

Distillate fuel oil stocks decreased 1.4 million barrels from the previous report week; distillate stocks are at 128 million barrels. EIA reported national distillate demand at 4.556 million barrels per day during the report week, an increase of 807,000 barrels daily.

Propane stocks decreased 3.7 million barrels from the previous report week; propane stocks are at 58.7 million barrels. The report estimated current demand at 2.253 million barrels per day, an increase of 689,000 barrels daily from the previous report week.


Natural Gas

Natural gas withdrawals of 206 Bcf for the week ended Jan. 14 were slightly higher than market expectations and substantially higher than both the five-year and last year’s reductions. Despite colder weather, storms, snow, and lower weekly LNG exports, prices fell on release of the data and ended the week on a tepid note: an inside day offering no guidance on future price direction.

Expectations of more snow and cold, however, conflict with reports of a decline in natural gas consumption across all sectors. Demand fell 6% during the report week. Gas for power fell 5.4% and industry used 2.2% less during the week.

According to the EIA:

Net withdrawals from storage totaled 206 Bcf for the week ending Jan. 14, compared with the five-year (2017–2021) average net withdrawals of 167 Bcf and last year’s net withdrawals of 179 Bcf during the same week. Working natural gas stocks totaled 2,810 Bcf, which is 33 Bcf more than the five-year average and 226 Bcf lower than last year at this time.

The average rate of withdrawals from storage is 15% lower than the five-year average so far in the withdrawal season (November through March). If the rate of withdrawals from storage matches the five-year average of 14.6 Bcf/d for the remainder of the withdrawal season, the total inventory would be 1,699 Bcf on March 31, which is 33 Bcf higher than the five-year average of 1,666 Bcf for that time of year.


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