October is now the front month NYMEX futures contract for WTI.
In after hours trading, the September NYMEX contract settled at $67.75. Late spike caused by lots of shorts that had to cover or come up with physical oil.
The U.S. dollar appears to be heading for a 4th straight down day. After a steady move to 97.0 on August 15 that started mid-April, the dollar is now at 95.6. Trump would like the dollar to move back to ~90. That would take WTI back to $70 (all else being equal, which of course will never happen).
If the upcoming U.S. / China trade talks result in some solution to the "Trade Wars", the global economy and demand for oil will march higher.
Today the "Right Price" for WTI is in the $65 to $70 range. The Sweet 16 companies are all profitable and generating lots of cash flow from operations at $65/WTI. Cash lifting costs, including LOE, gathering, processing, transportation and production taxes, are under $10/BOE.
Oil Price - August 21
Oil Price - August 21
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - August 21
From Reuters:
The Energy Information Administration is now forecasting gasoline consumption will be essentially unchanged in 2018, down from predicted growth of around 30,000 barrels per day (bpd) at the start of the year (“Short-Term Energy Outlook”, EIA, August 2018).
If the prediction proves accurate, it will be the second year of little or no growth, after gasoline use surged by 140,000 bpd in 2016 and 257,000 bpd in 2015, corresponding with the slump in oil prices.
DIESEL DEMAND
Lack of growth in gasoline contrasts with distillate fuel oil, where consumption between March and May was up by almost 75,000 bpd compared with 2017, spurred by rising industrial output and strong growth in freight.
U.S. freight volumes were up by more than 8 percent year-on-year in June, according to the U.S. Bureau of Transportation Statistics (“Transportation Services Index”, BTS, August 2018).
Manufacturing output was up by 2.8 percent in the year to July while mining output, which includes oil and gas drilling, rose by 12.9 percent (“Industrial production and capacity utilization”, Federal Reserve, August 2018).
Distillate fuel oil and jet fuel accounted for essentially all the growth in fuel consumption in the United States in the March-May period.
EIA forecasts distillate consumption will increase by 170,000 bpd in 2018, while jet fuel will be up by another 30,000 bpd.
Freight growth within the United States remains robust, but in the rest of the world has showed signs of slowing since the start of the year.
Flat-lining domestic gasoline consumption coupled with softness in international distillate growth helps explain why benchmark oil prices have pulled back from highs set in May.
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MY TAKE: The rise in the U.S. dollar is the primary reason for oil prices drifting lower since May. Distillates and jet fuel inventories are quite low. One problem is that they cannot be made from the Ultra Light shale oil. Home Heating Oil is a "distillate". A cold winter in North America (now the forecast) could cause shortages. If you heat your home with oil, fill the tanks early. - Dan
The Energy Information Administration is now forecasting gasoline consumption will be essentially unchanged in 2018, down from predicted growth of around 30,000 barrels per day (bpd) at the start of the year (“Short-Term Energy Outlook”, EIA, August 2018).
If the prediction proves accurate, it will be the second year of little or no growth, after gasoline use surged by 140,000 bpd in 2016 and 257,000 bpd in 2015, corresponding with the slump in oil prices.
DIESEL DEMAND
Lack of growth in gasoline contrasts with distillate fuel oil, where consumption between March and May was up by almost 75,000 bpd compared with 2017, spurred by rising industrial output and strong growth in freight.
U.S. freight volumes were up by more than 8 percent year-on-year in June, according to the U.S. Bureau of Transportation Statistics (“Transportation Services Index”, BTS, August 2018).
Manufacturing output was up by 2.8 percent in the year to July while mining output, which includes oil and gas drilling, rose by 12.9 percent (“Industrial production and capacity utilization”, Federal Reserve, August 2018).
Distillate fuel oil and jet fuel accounted for essentially all the growth in fuel consumption in the United States in the March-May period.
EIA forecasts distillate consumption will increase by 170,000 bpd in 2018, while jet fuel will be up by another 30,000 bpd.
Freight growth within the United States remains robust, but in the rest of the world has showed signs of slowing since the start of the year.
Flat-lining domestic gasoline consumption coupled with softness in international distillate growth helps explain why benchmark oil prices have pulled back from highs set in May.
-----------------------
MY TAKE: The rise in the U.S. dollar is the primary reason for oil prices drifting lower since May. Distillates and jet fuel inventories are quite low. One problem is that they cannot be made from the Ultra Light shale oil. Home Heating Oil is a "distillate". A cold winter in North America (now the forecast) could cause shortages. If you heat your home with oil, fill the tanks early. - Dan
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - August 21
Bloomberg: Oil Steady Before Supply Data While U.S. Taps Strategic Reserves
Tuesday, August 21
Oil traded near $67 a barrel before weekly oil inventory data in the U.S., where the government is proceeding with further sales of crude from its strategic reserves. Futures in New York were little changed. The U.S. government will offer 11 million barrels of crude from its Strategic Petroleum Reserve as part of a regular draw-down schedule. While the move also comes amid renewed American sanctions against Iran’s oil sales, it’s too small to be intended to compensate, according to BNP Paribas SA.
America’s commercial crude inventories are estimated to have fallen last week. “Considering the amount of Iran exports that may be potentially lost, we are talking a very different order of magnitude,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London. “Offsetting losses from Iran will take an increase in production, notably from Saudi Arabia.” Oil capped a seventh weekly decline last week amid uncertainty over the U.S.-China trade standoff and the risk of economic turmoil in Turkey spilling over into other emerging markets. Investors are also closely watching supplies from the U.S. and the Organization of Petroleum Exporting Countries before U.S. sanctions on Iran’s oil take effect in November. The measures may curb the Persian Gulf nation’s exports by as much as 1 million barrels a day.
Tuesday, August 21
Oil traded near $67 a barrel before weekly oil inventory data in the U.S., where the government is proceeding with further sales of crude from its strategic reserves. Futures in New York were little changed. The U.S. government will offer 11 million barrels of crude from its Strategic Petroleum Reserve as part of a regular draw-down schedule. While the move also comes amid renewed American sanctions against Iran’s oil sales, it’s too small to be intended to compensate, according to BNP Paribas SA.
America’s commercial crude inventories are estimated to have fallen last week. “Considering the amount of Iran exports that may be potentially lost, we are talking a very different order of magnitude,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London. “Offsetting losses from Iran will take an increase in production, notably from Saudi Arabia.” Oil capped a seventh weekly decline last week amid uncertainty over the U.S.-China trade standoff and the risk of economic turmoil in Turkey spilling over into other emerging markets. Investors are also closely watching supplies from the U.S. and the Organization of Petroleum Exporting Countries before U.S. sanctions on Iran’s oil take effect in November. The measures may curb the Persian Gulf nation’s exports by as much as 1 million barrels a day.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group