Iranian Nuclear Discussions are Under Way
- Colonial pipeline stoppage has a small impact on futures
- Global crude oil supply could grow
- Iran could add two million barrels daily to supply
- Natural gas rig count grows 28.8% year on year
Alan Levine—Chairman, Powerhouse
(202) 333-5380
The Matrix
The Colonial Pipeline has returned to service. Resupply along the United States East Coast is under way, with the line operating at about half of its capacity. The effect on retail gasoline prices was rapid and obvious.
Petroleum futures, on the other hand, hardly moved. This could have indicated adequate storage in New York Harbor, or reflect the availability of space on other supply sources like the Buckeye pipeline, carrying supply from the Midwest.
An emerging development is an effort to produce a better relationship between Saudi Arabia and Iran. This, in addition to interest by the United States in rejoining the Iranian nuclear agreement, could change the atmosphere surrounding renewed oil exports from Iran. A hope for success lies in the fact that Saudi Arabia does not want to become isolated without U.S. support.
The discussions between the U.S. and Iran are now under way. Russia, China, Germany, France and Britain are also involved. The United States has indicated its willingness to ease sanctions including oil and finance in return for a substantial set of inspections and verifications. Iran refuses to meet the U.S. face to face. In addition, there is an upcoming election in Iran, and if the hardliners show more strength than expected, all of this may be a moot point.
A renewed agreement might allow Iran to boost oil exports. The country was sending more than two million barrels daily before the imposition of sanctions.
Some analysts think it will be 2022 before any arrangement is done. The broad range of interests can be seen by concern over the reaction of OPEC+ to a successful conclusion to an Iranian agreement.
Supply/Demand Balances
Supply/demand data in the United States for the week ended May 7, 2021, were released by the Energy Information Administration.
Total commercial stocks of petroleum rose by 3.9 million barrels during the week ended May 7, 2021.
Commercial crude oil supplies in the United States decreased by 0.4 million barrels from the previous report week to 484.7 million barrels.
Crude oil inventory changes by PAD District:
PADD 1: Down 1.7 to 6.7 million barrels
PADD 2: Down 1.0 million barrels to 134.3 million barrels
PADD 3: Plus 1.9 million barrels to 271.5 million barrels
PADD 4: Plus 0.1 million barrels to 25.0 million barrels
PADD 5: Plus 0.2 million barrels to 48.2 million barrels
Cushing, Oklahoma, inventories were down 0.4 million barrels from the previous report week to 45.7 million barrels.
Domestic crude oil production was up 100,000 barrels per day from the previous report week at 11.0 million barrels daily.
Crude oil imports averaged 5.488 million barrels per day, a daily increase of 37,000 barrels. Exports decreased 2.326 million barrels daily to 1.796 million barrels per day.
Refineries used 86.5% of capacity, 1.1 percentage points higher from the previous report week.
Crude oil inputs to refineries decreased 223,000 barrels daily; there were 15.020 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 126,000 barrels daily to 15.572 million barrels daily.
Total petroleum product inventories rose 4.3 million barrels from the previous report week.
Gasoline stocks rose 0.4 million barrels from the previous report week; total stocks are 236.2 million barrels.
Demand for gasoline fell 64,000 barrels per day to 8.800 million barrels per day.
Total product demand decreased 2.208 million barrels daily to 17.483 million barrels per day.
Distillate fuel oil stocks fell 1.7 million barrels from the previous report week; distillate stocks are at 134.4 million barrels. EIA reported national distillate demand at 3.968 million barrels per day during the report week, a decrease of 157,000 barrels daily.
Propane stocks rose 2.5 million barrels from the previous report week; propane stocks to 44.0 million barrels. The report estimated current demand at 0.635 million barrels per day, a decrease of 718,000 barrels daily from the previous report week.
Natural Gas
The total rig count continues to grow as the United States emerges from the pandemic. The number of rigs reached 447 in the week ended May 4. Oil drilling accounted for 344 units in service, an increase of 17.8% over last year. Natural gas reached 103 drills, fully 28.8% higher than last year. Last year was affected by COVID-19, but the current number of natural gas rigs should ease concerns over natural gas availability, especially considering rapid growth in LNG exports.
Natural gas reached $3.15 in its most recent rally. This reached an expected objective of $3.12 to $3.16 and could become the seasonal top. The rally is being attributed to the solid block of warmer than expected weather coming this week.
According to the EIA:
The net [natural gas] injections into storage totaled 71 Bcf for the week ended May 7, compared with the five-year (2016–2020) average net injections of 82 Bcf and last year’s net injections of 104 Bcf during the same week. Working natural gas stocks totaled 2,029 Bcf, which is 72 Bcf lower than the five-year average and 378 Bcf lower than last year at this time.
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