The International Energy Agency (IEA), based in Paris, France publishes their monthly Oil Market Report (OMR) the middle of each month. It is one of the world's most authoritative and timely sources of data, forecasts and analysis on the global oil market.
Per IEA
Global oil demand is estimated to have declined for three straight months due to a resurgence of Covid-19 cases in Asia. As a result, 3Q21 has been revised down by 200 kb/d since last month’s Report. Already signs are emerging of Covid cases abating with demand now expected to rebound by a sharp 1.6 mb/d in October, and continuing to grow until end-year. Global oil demand is now expected to rise by 5.2 mb/d this year and by 3.2 mb/d in 2022.
World oil supply fell 540 kb/d m-o-m in August to 96.1 mb/d and is expected to hold steady in September as unplanned outages offset increases from OPEC+. Hurricane Ida shut in 1.7 mb/d of oil production along the US Gulf Coast at end-August, with potential supply losses from the storm approaching 30 mb. An uptrend in supply should resume in October as OPEC+ continues to unwind cuts, outages are resolved and as other producers increase.
A steep fall in China’s refinery activity in July, followed by Hurricane Ida’s impact on US refining in August and September resulted in an 830 kb/d revision to the 3Q21 global refining throughput, which now stands at 78.5 mb/d, up 1.5 mb/d from 2Q21. In August, the first significant decline in crude prices since September 2020 boosted product cracks and refinery margins across the board.
This is the KEY STAT: OECD total industry stocks drew by 34.4 mb in July and stood at 2,850 mb, 185.7 mb lower than the 2016-2020 average and 120.3 mb below the pre-Covid five-year average. Preliminary data for the US, Europe and Japan show industry stocks decreased by a further 31.1 mb while crude oil held in short-term floating storage decreased by 20.3 mb to 101.7 mb in August.
Prices fell on average in August, trading in a wide $8-9/bbl range, and the forward price curve flattened substantially. The drop reflects concerns about economic growth, inflation prospects and weaker oil demand linked to rising Covid infections. By early September, supply losses from Hurricane Ida lifted prices almost back to early July levels. North Sea Dated prices lost $4.24/bbl in August to $70.75/bbl and WTI at Cushing fell $4.73/bbl m-o-m to $67.73/bbl.
Highlights
Unexpected outages during August forced a decline in supply for the first time in five months and extended the sharp drawdown in global oil stocks. The most severe by far was Hurricane Ida, which wreaked havoc on the key US Gulf Coast oil producing region at the end of August, knocking 1.7 mb/d offline. Concerns over the impact of rising Covid-19 cases on oil demand kept a lid on prices, however, with benchmark crudes falling month-on-month before edging marginally higher in early September. At the time of writing, Brent futures traded at around $73.80/bbl and WTI at $70.70/bbl.
Hurricane Ida is still causing problems for US and global markets. Offshore installations and refineries have been slow to restart due to the severity of the storm, forcing massive stock draws of both crude and products in key markets. The biggest impact on supply will be seen in September, with total supply losses estimated at around 30 mb.
Already in August, production outages led to further sharp declines in inventories. Preliminary data show OECD oil stocks falling by more than 30 mb last month, extending steep losses over June and July. By the end of July, OECD total industry stocks stood 185.7 mb below the most recent five-year average. With nearly 900 kb/d of crude output and 700 kb/d of refinery capacity offline at the time of writing, hefty draws are expected to continue through September.
The US Department of Energy announced on 23 August a sale of up to 20 mb from its Strategic Petroleum Reserve (SPR) as part of its programme to use the SPR to finance spending. The deliveries will take place between 1 October and 15 December and could offset some of the losses from Hurricane Ida. The US government is also loaning barrels from the SPR to the region’s refiners to help offset crude shortfalls. China, too, is tapping into its strategic reserves. For the first time ever, it will sell oil from state-owned tanks in an effort to dampen domestic oil prices and inflationary pressures. It is unclear how many barrels will be made available to the market.
At the same time, demand growth in China and elsewhere in Asia is under pressure from resurgent Covid cases. We have revised down our world oil demand forecast for August and September by nearly 600 kb/d as China and a number of other South East Asian countries enforce more mobility restrictions. Strong pent-up demand and continued progress in vaccination programmes should underpin a robust rebound from 4Q21. Our annual growth forecast is revised marginally lower since last month’s Report for 2021 (-110 kb/d) to 5.2 mb/d while 2022 growth is slightly higher, at 3.2 mb/d.
The market should shift closer to balance starting from October if OPEC+ continues to unwind production cuts. Even so, it is only by early 2022 that supply will be high enough to allow oil stocks to be replenished. In the meantime, strategic oil stocks from the US and China may go some way to help plug the gap.
MY TAKE: This world is "short oil" and above ground inventories of crude oil and refined products are now below 30 days of supply and probably getting close to 28 days of supply, even though demand is still being impacted by Covid related travel restrictions. Whenever we finally get to "Post-Pandemic World" there will be an energy crisis that pushes oil over $100/bbl. The Green New Deal is NOT GOING TO LOWER OIL DEMAND for at least ten years even in AOC World.
IEA Oil Market Report - Sept 14
IEA Oil Market Report - Sept 14
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: IEA Oil Market Report - Sept 14
Energy Report: Net-Net Lose
By Phil Flynn (Sep 14, 2021 09:17AM ET)
What is the world to gain if it gets oil from OPEC+ but loses it in the Gulf of Mexico? The International Energy Agency (IEA) pointed out the obvious, that the loss of production from Hurricane Ida and now more challenges from Hurricane Nicholas, are going to keep the global oil situation in a supply versus demand deficit. The IEA reports that it may be October before the market can attempt to replace the estimated 540,000 a barrel a day drop in global supplies that we had in August and is expected to continue even into September on the slow rebound in Gulf oil and gas production.
Progress on the Gulf of Mexico recovery is slow but there was some progress. The Bureau of Safety and Environmental Enforcement (BSEE) said about 794,000 barrels per day (bpd) of crude production and 1.15 billion cubic feet per day of gas were offline, while 47 production platforms continued evacuated. Progress shouldn’t speed too much because of Hurricane Nicholas. High winds and rains will slow the process more, adding to the deficit.
All Texas ports were closed yesterday with no ship traffic allowed to leave. That is a problem for Europe who desperately is waiting for LNG cargos from the United States to offset their shortage of supply. European gas prices rocketed 7% to a new all-time high as prices have surged 60% since the beginning of August. The wind farms are not cutting it as the wind fails to blow. Natural gas supply for Europe is well below what they need to be with winter around the corner. Just a preview of what the Biden Energy plans might look like here in the United States in the future. Good luck charging that electric car buddy. It will either be prohibitively expensive, or you won’t have the power to do it.
Gasoline prices at the pump are remaining stable to lower right now but that may change if they don’t get production back online. AAA says with the height of summer in the rearview mirror, motorists are seeing some relief at the pump, as the national gasoline price average dropped by a penny on the week to $3.17. However, the recovery from Hurricane Ida remains slow, with the latest U.S. data showing just under half of the U.S. offshore oil production in the Gulf still idle after companies shuttered production ahead of the storm.
Meanwhile, refinery utilization is down almost 10%, causing gasoline stock levels to fall by 7.2 million bbl to 220 million bbl, according to the Energy Information Administration (EIA). Stock levels are likely to remain tight until Ida affected refineries resume normal operations. While refineries are reporting progress towards restarting, the U.S. Department of Energy (DOE) said it would release an additional 1.5 million bbl of crude oil held at the U.S. Strategic Petroleum Reserve (SPR) to help ease tightened supplies brought by Hurricane Ida. This is the second such release, and the DOE said the SPR has now released a total of 3.3 million bbl of crude oil in response to the storm. < This is a drop in the bucket when compared to the 15-16 million barrels per day of crude oil that U.S. refiners need to process to keep up with demand.
The constraint on stocks would typically lead to higher prices, but it has been offset by decreased demand going into the fall. In the week ahead, pump prices may be impacted by Tropical Storm Nicholas, which is expected to bring heavy rains and a storm surge to the Texas coast this week. If the tropical storm puts additional refineries offline, we are likely to see prices increase.
In both oil and natural gas there’s still significant upside risk in prices. Supplies could fall to critical levels as we head into winter. Let’s just hope and pray that our politicians learn from this man-made energy crisis. To succeed with the energy transition, it must be done in a more organized and thought out plan based on real world facts and not emotions otherwise you’re just going to create a lot of pain not only for people but for the economy.
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MY TAKE: We have idiots in Washington, so we are just at the beginning of many more energy shortages to come.
By Phil Flynn (Sep 14, 2021 09:17AM ET)
What is the world to gain if it gets oil from OPEC+ but loses it in the Gulf of Mexico? The International Energy Agency (IEA) pointed out the obvious, that the loss of production from Hurricane Ida and now more challenges from Hurricane Nicholas, are going to keep the global oil situation in a supply versus demand deficit. The IEA reports that it may be October before the market can attempt to replace the estimated 540,000 a barrel a day drop in global supplies that we had in August and is expected to continue even into September on the slow rebound in Gulf oil and gas production.
Progress on the Gulf of Mexico recovery is slow but there was some progress. The Bureau of Safety and Environmental Enforcement (BSEE) said about 794,000 barrels per day (bpd) of crude production and 1.15 billion cubic feet per day of gas were offline, while 47 production platforms continued evacuated. Progress shouldn’t speed too much because of Hurricane Nicholas. High winds and rains will slow the process more, adding to the deficit.
All Texas ports were closed yesterday with no ship traffic allowed to leave. That is a problem for Europe who desperately is waiting for LNG cargos from the United States to offset their shortage of supply. European gas prices rocketed 7% to a new all-time high as prices have surged 60% since the beginning of August. The wind farms are not cutting it as the wind fails to blow. Natural gas supply for Europe is well below what they need to be with winter around the corner. Just a preview of what the Biden Energy plans might look like here in the United States in the future. Good luck charging that electric car buddy. It will either be prohibitively expensive, or you won’t have the power to do it.
Gasoline prices at the pump are remaining stable to lower right now but that may change if they don’t get production back online. AAA says with the height of summer in the rearview mirror, motorists are seeing some relief at the pump, as the national gasoline price average dropped by a penny on the week to $3.17. However, the recovery from Hurricane Ida remains slow, with the latest U.S. data showing just under half of the U.S. offshore oil production in the Gulf still idle after companies shuttered production ahead of the storm.
Meanwhile, refinery utilization is down almost 10%, causing gasoline stock levels to fall by 7.2 million bbl to 220 million bbl, according to the Energy Information Administration (EIA). Stock levels are likely to remain tight until Ida affected refineries resume normal operations. While refineries are reporting progress towards restarting, the U.S. Department of Energy (DOE) said it would release an additional 1.5 million bbl of crude oil held at the U.S. Strategic Petroleum Reserve (SPR) to help ease tightened supplies brought by Hurricane Ida. This is the second such release, and the DOE said the SPR has now released a total of 3.3 million bbl of crude oil in response to the storm. < This is a drop in the bucket when compared to the 15-16 million barrels per day of crude oil that U.S. refiners need to process to keep up with demand.
The constraint on stocks would typically lead to higher prices, but it has been offset by decreased demand going into the fall. In the week ahead, pump prices may be impacted by Tropical Storm Nicholas, which is expected to bring heavy rains and a storm surge to the Texas coast this week. If the tropical storm puts additional refineries offline, we are likely to see prices increase.
In both oil and natural gas there’s still significant upside risk in prices. Supplies could fall to critical levels as we head into winter. Let’s just hope and pray that our politicians learn from this man-made energy crisis. To succeed with the energy transition, it must be done in a more organized and thought out plan based on real world facts and not emotions otherwise you’re just going to create a lot of pain not only for people but for the economy.
-----------------------
MY TAKE: We have idiots in Washington, so we are just at the beginning of many more energy shortages to come.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group