Oil Futures Prices Edge Higher

  1. U.S. crude oil output falls 600,000 barrels daily
  2. OPEC+ adds Iraq to list of cooperating crude oil suppliers
  3. Impact of a larger, “CD-19 spike” limits rally potential
  4. Natural gas supply on track to exceed five-year average at end of injection season

 

Al pic 2009_cropped

Alan Levine, Chairman of Powerhouse
 
 

The Matrix

Petroleum product futures prices reached new highs as the week ended June 19.

ULSD settled at $1.2114, a daily gain of $0.059. It opens the way to new resistance at $1.3029 which is also the bottom of a gap which closes at $1.3783.

RBOB reached $1.2718 at settle. In March 2020, a price gap was opened at $1.3072. The gap is filled at $1.4880.

WTI crude oil was unable to achieve a new high at week’s end. July WTI was not able to top $40, settling at $39.75. It may have been responding to media accounts of OPEC+ negotiators pushing toward a more bullish outcome in their search for acceptable cuts in global crude oil supply.

Both Iraq and Kazakhstan have reportedly agreed to hew more closely to production cuts to support global prices. This could foreshadow less crude oil supply at midyear.

Crude oil supply from domestic U.S. sources took a big hit. The EIA Supply/Demand balance reported production of 10.5 million barrels per day for the week ending June 12. This was a weekly decline of 600,000 barrels daily and adds materially to the total loss of supply that had, at its peak achieved 13.1 million barrels per day.

Crude oil imports fell 222,00 barrels daily to 6.6 million barrels per day. Exports remained essentially unchanged at 2.5 million barrels daily. These changes in supply came at a time when demand was stabilizing. Crude oil run to stills reached 13.6 million barrels per day, an increase of 116,000 barrels daily.

Crude oil imports fell 222,00 barrels daily to 6.6 million barrels per day. Exports remained essentially unchanged at 2.5 million barrels daily. These changes in supply came at a time when demand was stabilizing. Crude oil run to stills reached 13.6 million barrels per day, an increase of 116,000 barrels daily.

The bullish news certainly played a role in moving prices higher, but the still-uncertain effect of COVID-19 cannot be ignored. Scientists are continuing to project renewed infection. This could lead to a new shutdown in economic activity. At least one chain has again shuttered several retail outlets, and some cities are considering imposing shelter-in-place orders.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ended June 12, 2020, were released by the Energy Information Administration.

Total commercial stocks of petroleum rose by 8.8 million barrels during the week ended June 12, 2020.

Commercial crude oil supplies in the United States increased by 1.2 million barrels from the previous report week to 538.1 million barrels.

Crude oil inventory changes by PAD District:
PADD 1: Down 0.1 million barrels to 12.4 million barrels
PADD 2: Down 2.7 million barrels to 140.7 million barrels
PADD 3: Plus 3.8 million barrels to 307.5 million barrels
PADD 4: Plus 0.9 from the previous report week to 25.6 million barrels
PADD 5: Down 0.6 million barrels to 55.8 million barrels

Cushing, Oklahoma inventories were down 0.6 million barrels from the previous report week to 46.8 million barrels.

Domestic crude oil production fell 0.6 million barrels per day from the previous report week to 10.5 million barrels daily.

Crude oil imports averaged 6.642 million barrels per day, a daily decrease of 222,000 barrels. Exports rose 23,000 barrels daily to 2.462 million barrels per day.

Refineries used 73.8% of capacity, plus 0.7% from the previous report week.

Crude oil inputs to refineries increased 116,000 barrels daily; there were 13.600 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 128,000 barrels daily to reach 13.999 million barrels daily.

Total petroleum product inventories rose 5.9 million barrels from the previous report week.

Gasoline stocks decreased 1.7 million barrels daily from the previous report week; total stocks are 257.0 million barrels.

Demand for gasoline fell 31,000 barrels per day to 7.87 million barrels per day.

Total product demand decreased 283,000 barrels daily to 17.290 million barrels per day.

Commercial crude oil supplies in the United States increased by 1.2 million barrels from the previous report week to 538.1 million barrels.

Crude oil inventory changes by PAD District:
PADD 1: Down 0.1 million barrels to 12.4 million barrels
PADD 2: Down 2.7 million barrels to 140.7 million barrels
PADD 3: Plus 3.8 million barrels to 307.5 million barrels
PADD 4: Plus 0.9 from the previous report week to 25.6 million barrels
PADD 5: Down 0.6 million barrels to 55.8 million barrels

Cushing, Oklahoma inventories were down 0.6 million barrels from the previous report week to 46.8 million barrels.

Domestic crude oil production fell 0.6 million barrels per day from the previous report week to 10.5 million barrels daily.

Crude oil imports averaged 6.642 million barrels per day, a daily decrease of 222,000 barrels. Exports rose 23,000 barrels daily to 2.462 million barrels per day.

Refineries used 73.8 percent of capacity, plus 0.7% from the previous report week.

Crude oil inputs to refineries increased 116,000 barrels daily; there were 13.600 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 128,000 barrels daily to reach 13.999 million barrels daily.

Total petroleum product inventories rose 5.9 million barrels from the previous report week.

Gasoline stocks decreased 1.7 million barrels daily from the previous report week; total stocks are 257.0 million barrels.

Demand for gasoline fell 31,000 barrels per day to 7.87 million barrels per day.

Total product demand decreased 283,000 barrels daily to 17.290 million barrels per day.

 

Natural Gas

The narrow range in which natural gas futures prices have been trading may have induced a sense of apathy in the trading community. Looking past the currently flat aspect of natural gas trading could lead to expensive misjudgments.

Lower prices would seem to be the inevitable path for natural gas futures going forward. Underground storage is on track to reach 4,142 Bcf at October 31, 2020, well over the 5-year average for that time of year.

The shape of forward prices shows a strong carry for this winter, a bearish feature. Winter natural gas futures have shown no interest in moving higher. Prices for the months of November 2020 through March 2021 topped at $2.98 on May 4th. They have since ground slowly lower, now around $2.74.

According to EIA:

The net injections into [natural gas] storage totaled 85 Bcf for the week ending June 12, compared with the five-year (2015–19) average net injections of 87 Bcf and last year’s net injections of 111 Bcf during the same week. Working natural gas stocks totaled 2,892 Bcf, which is 419 Bcf more than the five-year average and 722 Bcf more than last year at this time

The average rate of injections into storage is 14% higher than the five-year average so far in the refill season (April through October). If the rate of injections into storage matched the five-year average of 8.9 Bcf/d for the remainder of the refill season, the total inventory would be 4,142 Bcf on October 31, which is 419 Bcf higher than the five-year average of 3,723 Bcf for that time of year.

 

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Powerhouse is a registered affiliate of Coquest, Inc.
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