Energy independence paying off

  1. U.S. emerging as true “swing producer”
  2. U.S. leading world in recoverable crude oil reserves
  3. U.S. leading world in propane exports
  4. Pace of natural gas injections to storage are slowing

Al pic 2009_cropped

Sincerely,
Alan Levine Chairman, Powerhouse
 

2016-07-11_18-20-35

Table covers crude oil and principal products.  Other products, including residual fuel oil and “other oils” are not shown, and changes in the stocks of these products are reflected in “Total Petroleum Products.” Statistics Source: Energy Information Administration “Weekly Petroleum Status Report” available at www.eia.doe.gov

The Matrix

Implications of the shale revolution continue to unfold. Most of the changes in the energy environment come from improvements in the situation of the United States, more and more the “swing” producer of world-wide supply. Of course, the U.S. has a free market orientation. Changes in supply are the result of producers’ reactions to global events as expressed in price. The loss of production reflected low crude oil prices and the impact of lower revenues on profitability. How different than the centralized planning of national oil companies like that of Saudi Arabia which may introduce national imperatives beyond price.

The changes wrought by America becoming largely energy independent include our growing stature in global crude oil reserves. A recent analysis of recoverable reserves puts such reserves at 264 billion barrels. They come from existing fields, discoveries and “yet to be discovered” fields. And, for the first time, the U.S. now holds more reserves than either Saudi Arabia and Russia. Saudi holds 212 billion barrels and Russia, 256 billion barrels. The estimate asserts that half of the U.S. oil is held in shale deposits.

The significance of the emergence of the United States as the principal source of crude oil cannot be overstated. Availability of so much oil limited only by price confers major flexibility for the U.S. when responding to international crises.  Petroleum provides a relatively small share of Gross Domestic Product, less than five per cent. Perturbations in world energy events have, therefore, a comparably smaller effect on the country’s economic well-being.

Another change in the landscape is the emergence of propane for export.  Shale oil production inevitably brings additional NGLs to supply.  This is important for propane because prices overseas are higher than in the United States. U.S. companies are reported exporting more propane than the combined send-out of Qatar, Saudi Arabia, Algeria and Nigeria, the big four exporters until now.

Propane exports from the U.S. reached a high of 884 thousand barrels daily in February, reportedly an all-time high. This was made possible by expanded infrastructure including pipelines, terminal, and tankers. The recent expansion of the Panama Canal opens potential markets in Asia.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending July 1, 2016 were released by the Energy Information Administration.

Total commercial stocks of petroleum increased 3.4 million net barrels during the week ending July 1, 2016.

Builds were reported in stocks of fuel ethanol, propane, and other oils. Draws were reported in stocks of gasoline, distillates and residual fuel oil.  K-jet fuel remained unchanged at 40.2 million barrels.

Crude oil supplies in the United States decreased to 524.4 million barrels, a draw of 2.2 million barrels.

Crude oil supplies decreased in four of the five PAD Districts. PAD District 1 (East Coast) crude oil stocks declined 0.4 million barrels, PADD 2 (Midwest) stocks fell 1.4 million barrels, PADD 4 (Rockies) stocks decreased 0.3 million barrels, and PADD District 5 (West Coast) crude oil stocks declined 1.3 million barrels. PADD 3 (Gulf Coast) stocks increased 1.3 million barrels, Cushing, Oklahoma inventories decreased 1.0 million barrels to 64.1 million barrels.

Domestic crude oil production decreased 194,000 barrels daily to 8.428 million barrels per day. The decline was largely in Alaska; the lower 48 nonetheless lost output of 38,000 barrels daily.

Crude oil imports averaged 8.363 million barrels per day, a daily increase of 808,000 barrels.

Refineries used 92.5 per cent of capacity, a decrease of 0.5 percentage points from the previous report week.
Crude oil inputs to refineries decreased 8,000 barrels daily; there were 16.687 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, decreased 105,000 barrels daily to 16.927 million barrels daily.

Total petroleum product inventories saw an increase of 5.7 million barrels from the previous report week.

Gasoline stocks decreased 0.1 million barrels; total stocks are 238.9 million barrels.

Demand for gasoline increased 46,000 barrels per day to 9.755 million barrels daily.

Total product demand decreased 1.099 million barrels daily to 20.050 million barrels per day.

Distillate fuel oil supply decreased 1.6 million barrels; total stocks are 148.9 million barrels.  National distillate demand was reported at 3.933 million barrels per day during the report week. This was a weekly decrease of 65,000 barrels daily.

Propane stocks increased 2.7 million barrels to 84.8 million barrels. Current demand is estimated at 730,000 barrels per day, an increase of 4,000 barrels daily from the previous report week.

 

Natural Gas

According to the Energy Information Administration:

Net injections into storage totaled 39 Bcf during the storage report week, compared with the five-year (2011-15) average of 77 Bcf and last year’s net injection of 83 Bcf during the same week. As a result, the divergence in storage compared with the five-year average declined from the previous week to 599 Bcf, and the gap compared with year-ago levels decreased to 538 Bcf. The Pacific and South Central regions each posted net withdrawals for the second week in a row.

Temperatures in the Lower 48 states averaged 75°F during the storage report week. Temperatures during the report week were above normal throughout most of the Lower 48 states, on average by 3%, and were 3% above last year at this time. This week marked the fifth week in a row that cooling degree-days in the Lower 48 states exceeded the normal level. Cooling degree-days in the Lower 48 states since the beginning of the refill season on April 1 were 19% above normal.

 

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Powerhouse is a registered affiliate of Coquest, Inc.

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