World Oil Supply And Price Outlook, June 2020

The Energy Information Administration released its Short-Term Energy Outlook for June, and it shows that OECD oil inventories likely bottomed June 2018 at 2.802 billion barrels. It estimated stocks built by 94 million barrels in May to end at 3.358 billion, 442 million barrels higher than a year ago.

For 2020, OECD inventories are projected to build by 243 million barrels to 3.133 billion. For 2021 it forecasts that stocks will draw by 273 million barrels to end the year at 2.860 billion.

Oil

The EIA forecast was made after the OPEC+ decision to cut production and exports. According to OPEC’s press release: Continue reading "World Oil Supply And Price Outlook, June 2020"

World Oil Supply And Price Outlook, May 2020

The Energy Information Administration released its Short-Term Energy Outlook for May, and it shows that OECD oil inventories likely bottomed last June 2018 at 2.802 billion barrels. It estimated stocks built by 267 million barrels in April to end at 3.352 billion, 488 million barrels higher than a year ago.

The EIA estimated global oil production at 99.15 million barrels per day (mmbd) for April, compared to global oil consumption of 76.34 mmbd. That implies an oversupply of 22.81 mmbd or 684 million barrels for the month. A figure never experienced in history.

For 2020, OECD inventories are projected to build by 347 million barrels to 3.351 billion. For 2021 it forecasts that stocks will draw by 227 million barrels to end the year at 3.007 billion.

Oil

The EIA forecast was made to incorporate the OPEC+ decision to cut production and exports. According to OPEC’s press release: Continue reading "World Oil Supply And Price Outlook, May 2020"

Oil To Test Storage Capacity

Timing when oil storage will be full is one of the key issues of interest in the oil market. It depends on how long stays depressed, or how quickly it can rebound, and how much oil producers are cutting output in the U.S. and worldwide. The answers are unknown, but I will try to outline what is known and likely.

Oil data in the U.S. is the most timely and accurate, so that’s a good place to start. Crude oil inventories in Cushing, Ok., the delivery hub for the NYMEX WTI crude futures contract, reached 59.7 million barrels in the week ending April 17. About 2.1 million is used for line fill, and so 57.7 million is the net stocks held in tank farms. That represents 76 % of net working storage of 76.1 million barrels.

Given the excess storage, it would not explain why trader panic drove oil prices negative just prior to the expiration of the May contract. The reason was that the remaining storage was leased. “The terminals have already contracted their storage 100%,” said Ernie Barsamian, chief executive officer of The Tank Tiger, a terminal storage clearinghouse, was quoted.

And so traders who were still long but could not take delivery had to sell at any price. And buyers got Continue reading "Oil To Test Storage Capacity"

World Oil Supply And Price Outlook, April 2020

The Energy Information Administration released its Short-Term Energy Outlook for April, and it shows that OECD oil inventories likely bottomed last June 2018 at 2.802 billion barrels. It estimated stocks built by 109 million barrels in March to end at 3.059 billion, 201 million barrels higher than a year ago.

For 2020, OECD inventories are projected to build by 468 million barrels to 3.351 billion. For 2021 it forecasts that stocks will draw by 207 million barrels to end the year at 3.144 billion.

OECD Global Oil Inventories

The EIA forecast was made prior to the OPEC+ decision to cut production and exports. According to OPEC’s press release: Continue reading "World Oil Supply And Price Outlook, April 2020"

Oil Just Posted Its Worst Monthly/Quarterly Loss Ever!

Over the last month, we have seen the price of Crude oil benchmarks in the U.S. and Brent futures get destroyed. Both benchmarks lost right around two-thirds of their value during the first quarter and roughly 55% of their value during March alone.

The massive price destruction occurred because of many reasons. The first and foremost is the Coronavirus pandemic and how the world is fighting the spread of the virus. Shutting borders to foreign nationals, implementing 'Stay at home Orders,' and recommending 'social distancing' is all leading to a massive reduction in the demand for oil on a worldwide scale. Cruise ships aren't leaving ports, airlines have slashed their number of flights, both public busses and school busses are not operating, and the average person isn't driving their vehicles. We have already begun to see reports from around the world how pollution levels are declining due to these modes of transportation, essentially stopping.

The second reason the price of oil crumbled was because of the "price war' that is currently ragging between Russia and Saudi Arabia. The two countries were the main reasons the Organization of the Petroleum Exporting Countries (OPEC) couldn't agree on production cuts following the softening demand after the Coronavirus began spreading on a massive scale. Russia and OPEC's de facto leader, Saudi Arabia, disagreed on how much each country would reduce production in order to help stabilize the price of oil around the world.

The price war has caused the Saudi's to increase production from 9.7 million barrels a day in February to a targeted more than 12 million barrels a day in April. Thus far, they have held up their threats. As of early April, the first wave of crude was already heading toward Europe, and the U.S. Saudi Arabia hired extra supertankers in March. Those ships are positioned near oil terminals preparing to be filled. Continue reading "Oil Just Posted Its Worst Monthly/Quarterly Loss Ever!"