Exports Push Their Weight Around

  1. OPEC+ seek to support a $75 Brent price
  2. U.S. production reaches 12.1 million barrels per day
  3. Weekly crude oil exports reached 3.4 million barrels daily
  4. Negative natural gas price indicates stranded gas in the Permian.

Al pic 2009_cropped

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

The Matrix

The broad economy is the ultimate arbiter of price; the net of supply and demand. Oil prices continue to be challenged by conflicting needs of bulls and bears.

OPEC plus Russia have committed to withholding enough crude oil from the market to support a Brent crude oil price of $75. Markets seem to be embracing this idea. OPEC has even cancelled its spring meeting in service of the view that production cuts will hold. Historically, the OPEC record of production cut compliance has not been inspiring, but markets expect less supply this time around.

Oil producers in the United States are obvious beneficiaries of the OPEC+ cuts. The most recent weekly supply balance for the week ending March 15 shows crude oil production reaching 12.1 million barrels daily. And the International Energy Agency has estimated that gains in U.S. production will change the traditional structure of oil markets. IEA sees U.S. production growing 3.7 million barrels daily by 2023 – greater than half of global output growth. And total liquids production in the United States is expected to reach almost 17 million barrels per day by 2023. Total liquids include conventional and shale oil and natural gas liquids.  IEA also notes that current U.S. production is at a record level, while “Russia and Saudi Arabia – which also hit record highs in October and November respectively – will curtail 230,000 barrels daily and 322,000 barrels per day of their production in … 2019.

The impact of the U.S. on global oil availability can be seen in the dramatic growth of exports. The weekly balance put crude oil exports at 3.4 million barrels per day. One year ago, during the comparable week, exports were 1. 6 million barrels daily, an increase of 1.8 million barrels per day — more than a doubling of U.S. goods on global markets.

A release of the Department of Energy shows that the United States exported 2 million barrels per day of crude oil in 2018 to 42 different destinations.” This reminds us that exports go to several places. Their impact on U.S. trade with those places can be significant – and meaningful for evaluation of U.S. relations with foreign trading partners. DOE said, “In the first half of 2018, the United States exported 376,000 barrels daily to China which made China the largest single destination for U.S. crude oil exports for that period. However, in August, September, and October, the United States exported no crude oil to China” and significantly less than in earlier months in November and December. DOE ascribed the change to trade actions related to import tariffs.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending March 15, 2019 were released by the Energy Information Administration.

Total commercial stocks of petroleum decreased 12.6 million barrels during the week ending March 15, 2019.

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

Commercial crude oil supplies in the United States decreased 9.6 million barrels from the previous report week to 439.5 million barrels.

Crude oil supplies decreased in two of the five PAD Districts. PADD 2 (Midwest) crude oil stocks fell 1.9 million barrels and PADD 3 (Gulf Coast) crude stocks declined 8.6 million barrels. PADD 1 (East Coast) stocks were unchanged from the previous report week. PAD District 4 (Rockies) crude oil stocks rose 1.3 million barrels and PADD 5 (West Coast) stocks increased 0.5 million barrels.

Cushing, Oklahoma inventories decreased 0.5 million barrels from the previous report week to 46.4 million barrels.

Domestic crude oil production rose 100,000 barrels daily from the previous report week to 12.1 million barrels per day.

Crude oil imports averaged 6.932 million barrels per day, a daily increase of 186,000 barrels. Exports increased 846,000 barrels daily to 3.392 million barrels per day.

Refineries used 88.9 per cent of capacity, an increase of 1.3 percentage points from the previous report week.

Crude oil inputs to refineries increased 178,000 barrels daily; there were 16.198 million barrels per day of crude oil run to facilities.

Gross inputs, which include blending stocks, rose 246,000 barrels daily to 16.536 million barrels daily.

Total petroleum product inventories rose fell 5.0 million barrels from the previous report week.

Gasoline stocks decreased 4.6 million barrels from the previous report week; total stocks are 241.5 million barrels.

Demand for gasoline increased 269,000 barrels per day to 9.409 million barrels per day.

Total product demand increased 683,000 barrels daily to 21.492 million barrels per day.

Distillate fuel oil stocks decreased 4.1 barrels from the previous report week; distillate stocks are at 132.2 million barrels. National distillate demand was reported at 4.706 million barrels per day during the report week. This was a weekly increase of 752,000 barrels daily.

Propane stocks increased 1.0 million barrels from the previous report week; propane stock are 51.1 million barrels. Current demand is estimated at 1.253 million barrels per day, a decrease of 46,000 barrels daily from the previous report week.

 

Natural Gas

According to the Energy Information Administration:

Net withdrawals from storage totaled 47 Bcf for the week ending March 15, compared with the five-year (2014–18) average net withdrawals of 56 Bcf and last year’s net withdrawals of 87 Bcf during the same week. Working gas stocks totaled 1,143 Bcf, which is 556 Bcf lower than the five-year average and 315 Bcf lower than last year at this time.

The average rate of net withdrawals from storage is 3% 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 3.9 Bcf/d for the remainder of the withdrawal season, total inventories would be 1,080 Bcf on March 31, which is 556 Bcf lower than the five-year average of 1,636 Bcf for that time of year.

Natural gas prices have resisted moving higher, notwithstanding the storage deficit expected at the conclusion of the withdrawal season. Several reasons for the flat price performance of natural gas have been advanced. Some of them have to do with shortfalls in physical capabilities to move gas. An example of this was an equipment failure in New Mexico that plunged next-day natural gas prices at the Waha hub in West Texas to negative levels. “An all-time low close of -3 cents per mmBtu” was reported. Although unusual, it points to the gas stranded in the Permian basin and the pressure on prices which could be reflected in the Henry Hub standard.

 

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