Crude oil inventories -7195K vs. -500K estimate

Weekly Department of Energy inventory data for the week of June 26

  • Crude oil is trading at $39.70
  • crude oil inventories – 7195K vs. -500K est. The private data came in at -8156K.
  • gasoline inventories 1199K vs -1500K est. The private data showed a draw of -2459K
  • distillates inventories -593K vs 500K est.  The private data showed a build of 2638K
  • Cushing OK crude inventories -263K vs -991K last week
  • refinery utilization 0.9% vs. 0.5% estimate
  • crude oil implied demand 17997 vs 17334 last week
  • gasoline implied demand 9043.3 vs 8893.7 last week
  • distillates implied demand 4843.7 vs 4594 last week

Some oil news ICYMI – US shale producers to boost oil output by 500,000 bpd by month-end

Reuters report on what analysts & some in the industry are expecting

  • Larger producers are re-opening the taps in low-cost plays in Texas, but also in expensive shale basins in North Dakota and Oklahoma.
  • “With prices where they are now, if they stay above $30, I wouldn’t expect any significant curtailments from us in Q3 or beyond,” Devon Energy Corp Chief Executive David Hager said at a J.P. Morgan energy conference on Tuesday.
This would be a rapid (albeit partial) bounce back from prior supply cuts in shale. It’ll add pressure back onto OPEC+ who recently agreed to extend their their output cuts. Supply coming back on line as prices rise … pretty textbook economics this.
Here’s the link to Reuters for more
Reuters report on what analysts & some in the industry are expecting

OPEC sticks to demand-drop forecast

The latest numbers from the monthly OPEC report

  • Left 2020 demand forecast at -9.1 mbpd
  • Says Q2 demand was down 17.3 mbpd
  • OPEC output fell 6.3mbpd in May based on secondary sources
OPEC’s Joint Ministerial Monitoring Committee meets this week to assess supply-demand balances. So far they haven’t adopted the reopening optimism but noted that higher prices are “suggesting that the supply-demand fundamentals are gradually improving.”
WTI crude was volatile yesterday and has ticked lower today, down 55-cents to $37.84.

The latest numbers from the monthly OPEC report

IEA says oil demand won’t fully recover until at least 2022

IEA comments on the oil market in its latest report

Oil
  • Floating storage of crude oil in May fell by 6.4 mil barrels m/m to 165.8 mil barrels
  • Global oil supply fell by 11.8 mil bpd in May
  • Helped by OPEC+ countries reducing output by 9.4 mil bpd
  • Sees oil demand next year to rise by 5.7 mil bpd, but still lower than in 2019
  • Oil demand next year to remain 2.4 mil bpd below 2019 levels
On OPEC+, IEA says that they made a “strong start” and delivered 89% of its pledge to cut output but warns that rising prices could pose a problem:

“The market may present producers with an opportunity to ramp up more quickly than dictated by current OPEC+ policy, or US and other non-OPEC production could recover more strongly than forecast.”

With oil prices having moved up back close to $40, nobody – even US shale drillers – will want to miss out on the party.

Weekly US oil inventories +5720K vs -1850K expected

Weekly US energy inventory data from the EIA:

  • Gasoline vs -1000K expected
  • Distillates +1568K vs +3500K
  • Cushing -2279K vs +1739K prior
  • Refinery utilization +1.3% vs +0.61% expected
  • Production 11.1 mbpd
The API data released late yesterday:
  • +8420K
  • Cushing -2285K
  • Gasoline -2913K
  • Distillates +4271K

The oil market hasn’t done much on the news with WTI down 86-cents to $38.31 today.

Oil price forecast, lower to end of 2020

Via UBS, their WTI Q4 2020 price forecast is $31

Snippets from the report:
The 6 June OPEC+ meeting agreed a first phase extension by a month to July 
  • Recent additional cuts of ~1.2Mbd from Saudi/UAE/Kuwait/Oman will not extend
  • tone on compliance is harder
past 2-3 months has been the rapid fall in US production
  • Oil price rebound likely prompts some of this production back in coming months and  
next OPEC+ meeting scheduled for 1 December 
  • monthly JMMC meetings will monitor market developments and OPEC+ compliance behaviour, which has helped with the price rebound. 

Libya has halted oil production at an oilfield due to armed incursion

A statement from Libya’s National Oil Corp says workers have been told to stop due to an armed force entering the El Sharara oilfield

El Sharara oil field is located in Murzuq Desert
  • Libya’s largest oil field
  • only resumed production on Sunday
A statement from Libya's National Oil Corp says workers have been told to stop due to an armed force entering the El Sharara oilfield
I’m gonna have to trust Google maps is correct on this location. The label could see ‘free ice creams’ for all I know.

Oil likes what it heard from OPEC, prices edge higher early

Crude starts the week higher

Crude starts the week higher
WTI crude rose as high as $39.90 shortly after the open. It’s since ticked a few cents lower to $39.83, which is up 25-cents on the day.
OPEC+ announced a one-month cut extension on the weekend but it wasn’t all good news as some Libyan production came back online.
Keep a close eye on the $40 with crude in the March gap. The bottom end of it is $41.05.