Crude Supply Short: Supports Prices

  1. Oil prices reach new high
  2. African producers miss quotas
  3. Natural gas prices may have topped near term
  4. A very cold winter forecast for New England

Al pic 2009_cropped

Alan Levine—Chairman, Powerhouse
(202) 333-5380

 

The Matrix

Spot liquid petroleum futures prices continued their push higher. The week ended October 15, 2021, saw new highs in all three legacy deliverable contracts. Crude oil (WTI) reached $82.66, RBOB hit $2.2488 and ULSD saw $2.5997. (Subsequently, new highs on October 18 reversed, closing below the previous highs.)

Supply issues are still pervasive in following the market. OPEC+ is being urged to increase output over the next several months beyond its initial plan to increase production by 400,000 barrels per day each month. Some producers are still falling short. Angola and Nigeria are perhaps the most seriously in arrears. The two nations have pumped 275,000 barrels per day under quota.

Others that cut output when demand was hit by COVID-19 have not yet increased output consistent with the growing demand situation. Nigeria expects to return to full production by early 2022. Saudi energy minister Prince Abdelaziz bin Salman stated: “I keep telling people we are increasing production.”

 

Supply/Demand Balances

Supply/demand data in the United States for the week ended October 8, 2021, were released by the Energy Information Administration.

Total commercial stocks of petroleum rose 4.9 million barrels during the week ended October 8, 2021.

Commercial crude oil supplies in the United States increased by 6.1 million barrels from the previous report week to 427.0 million barrels.

Crude oil inventory changes by PAD District:

PADD 1: Plus 0.2 million barrels to 8.1 million barrels

PADD 2: Down 2.7 million barrels to 10.7 million barrels

PADD 3: Plus 9.1 million barrels to 236.9 million barrels

PADD 4: Plus 0.3 million barrels to 23.4 million barrels

PADD 5: Down 0.8 million barrels to 47.9 million barrels

 

Cushing, Oklahoma, inventories were down 1.9 million barrels from the previous report week to 33.6 million barrels.

Domestic crude oil production was up 100,000 barrels per day from the previous report week to 11.4 million barrels daily.

Crude oil imports averaged 5.994 million barrels per day, a daily decrease of 1.041 million barrels. Exports increased 400,000 barrels daily to 2.514 million barrels per day.

Refineries used 88.1% of capacity; 0.6 percentage points higher from the previous report week.

Crude oil inputs to refineries decreased 683,000 barrels daily; there were 15.061 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 522,000 barrels daily to 15.715 million barrels daily.

Total petroleum product inventories fell 1.2 million barrels from the previous report week.

Gasoline stocks decreased 2 million barrels from the previous report week; total stocks are 223.1 million barrels.

Demand for gasoline fell 241,000 barrels per day to 9.186 million barrels per day.

Total product demand decreased 1.651 million barrels daily to 19.875 million barrels per day.

Distillate fuel oil stocks were unchanged from the previous report week; distillate stocks are at 129.3 million barrels. EIA reported national distillate demand at 3.932 million barrels per day during the report week, a decrease of 433,000 barrels daily.

Propane stocks decreased 0.6 million barrels from the previous report week; propane stocks are at 71.7 million barrels. The report estimated current demand at 1.116 million barrels per day, a decrease of 166,000 barrels daily from the previous report week.

 

Natural Gas

Natural gas injections into underground storage continue to lag standard averages. EIA estimates that the withdrawal season will open with stocks of 3.5 Tcf. This is well below the five-year average of 3.7 Tcf.

Natural gas futures prices topped on October 6 at $6.466. They have since settled into a range generally between $5.32 and $5.78.

EIA expects “U.S. production to average 96.4 Bcf/d in 2022, or 3.9 Bcf/d more than in 2021, and U.S. LNG exports to rise by 1.4 Bcf/d during this time period to reach 11.2 Bcf/d.” The Agency “forecast that faster growth in production will put downward pressure on natural gas prices.”

Looking beyond the near term, winter has been forecast to be one of the longest and coldest seen in years according to the Old Farmer’s Almanac. “The super cold of the coming winter will also bring lots of snow. This extreme wintry mix is expected in areas of New England as well as throughout the Ohio Valley, in northern portions of the Deep South, and in southeast New Mexico. NOAA’s recent identification of a “La Nina” event supports this idea.

According to the EIA:

Net [natural gas] injections into U.S. natural gas storage totaled 81 Bcf for the week ended October 8, compared with five-year (2016–2020) average net injections of 79 Bcf and last year’s net injections of 50 Bcf during the same week. Working natural gas stocks totaled 3,369 Bcf, which is 174 Bcf lower than the five-year average and 501 Bcf lower than last year at this time.

The average rate of injections into storage is 8% lower 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 7.7 Bcf/d for the remainder of the refill season, the total inventory would be 3,545 Bcf on October 31, which is 174 Bcf lower than the five-year average of 3,719 Bcf for that time of year.

 

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