Crude Supply Concerns Could be Alleviated in U.S.

  1. Conflicting objectives between U.S. and foreign producers raise supply worries
  2. Unproduced crude oil supplies available
  3. Tight pipeline and staff issues responsible
  4. EIA expects end-October natural gas storage to be 3.7 Tcf

Al pic 2009_cropped

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

The Matrix

Oil market watchers have been concerned in recent weeks that global stocks of crude oil have tightened and are likely to become even more constrained during July – December 2019.  This may reflect reduced imports into the United States, increasing refinery demand, offsetting growing crude oil production. U.S. petroleum product consumption has also been running at unusually high rates.

There is, however, another potential source of crude oil supply in the United States. This is the large number of drilled but uncompleted wells (DUC’s) in the supply inventory. EIA has released data on these wells. It identified seven important producing regions in which DUCs have been growing. They need only well completion activities to begin production.

DUCs reached 8,500 units in March. This was 26 per cent greater than during the previous March. The number of DUCs has been growing since late 2016. This gain may have reflected low resource prices or low availability of staff and other resources. Further, inadequate offtake capacity has backed production up and created more DUCs. (We discussed hyper-low well head prices in West Texas a few weeks ago.)

About half of the DUC inventory was located in the Permian region, where pipeline constraints have significantly offset regional exports. The importance of offtake capability has been shown in natural gas regions of the Appalachians and Haynesville, where the number of DUCs have been cut in half over the past three years. EIA says, “new pipelines in these regions have increased the ability to transport natural gas to demand centers in the Northeast and Midwest.”

Canadian supplies are expanding for many of the same reasons – inadequate infrastructure to bring western crudes to market. Export backups from Alberta led to curtailments of oil production earlier this year. Also, crude-by-rail shipments are now below last year’s levels. April loadings were put at 197,000 barrels per day. In December, the comparable number was 350,000 barrels daily.

The global supply situation remains complex and interconnected. Oil not available in the short term should help alleviate supply concerns over the longer run.

 

 

 

 

 

 

 

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending May 13, 2019 were released by the Energy Information Administration.

Total commercial stocks of petroleum fell 1.7 million barrels during the week ending May 3, 2019.

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

Commercial crude oil supplies in the United States declined 4.0 million barrels from the previous report week to 466.6 million barrels.

Crude oil supplies increased in two of the five PAD Districts. PADD 2 (Midwest) crude oil stocks rose 1.6 million barrels, and PADD 5 (West Coast) stocks advanced 0.5 million barrels.  PADD 1 (East Coast) stocks fell 1.3 million barrels, PADD 3 (Gulf Coast) stocks dropped 4.8 million barrels, and PADD 4 (Rockies) stocks declined 0.1 million barrels.

Cushing, Oklahoma inventories increased 0.8 million barrels from the previous report week to 46.0 million barrels.

Domestic crude oil production fell 100,000 barrels per day from the previous report week to 12.2 million barrels daily.

Crude oil imports averaged 6.693 million barrels per day, a daily decline of 721,000 barrels. Exports decreased 289,000 barrels daily to 2.322 million barrels per day.

Refineries used 88.9 per cent of capacity, a decrease of 0.3 percentage points from the previous report week.

Crude oil inputs to refineries decreased 41,000 barrels daily; there were 16.405 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 54,000 barrels daily to 16.687 million barrels daily.

Total petroleum product inventories rose 1.4 million barrels from the previous report week.

Gasoline stocks decreased 0.6 million barrels daily from the previous report week; total stocks are 226.1 million barrels.

Demand for gasoline rose 643,000 barrels per day to 9.871 million barrels per day.

Total product demand increased 255,000 barrels daily to 20.408 million barrels per day.

Distillate fuel oil stocks decreased 0.2 barrels from the previous report week; distillate stocks are at 125.6 million barrels. National distillate demand was reported at 3.896 million barrels per day during the report week. This was a weekly reduction of 319,000 barrels daily.

Propane stocks increased 1.0 million barrels from the previous report week; propane stocks are 60.0 million barrels. Current demand is estimated at 730,000 barrels per day, a decrease of 56,000 barrels daily from the previous report week.

 

Natural Gas

According to the Energy Information Administration:

Net injections into storage totaled 85 Bcf for the week ending May 3, compared with the five-year (2014–18) average net injections of 72 Bcf and last year’s net injections of 85 Bcf during the same week. Working gas stocks totaled 1,547 Bcf, which is 303 Bcf lower than the five-year average and 128 Bcf more than last year at this time.

EIA has forecast natural gas injections from April through October, (the typical injection period.) The agency expects that injections will exceed the average of the previous five years. Storage will reach 3.7 Tcf at the end-of-October. This is 15 per cent higher than October 2018 and about the same as the average of the past five years.

 

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