U.S. oil inventories fall as OPEC⁺ extends output curbs
U.S. petroleum inventories have depleted significantly since the middle of the year in response to slower production growth from the U.S. shale fields and the extension of ouput cuts by Saudi Arabia and its OPEC⁺ partners.
By deferring production increases, OPEC⁺ has not been able to engineer a rise in prices, but it has kept stocks tight and averted a much a much steeper slump in the face of tepid consumption growth.
U.S. crude inventories outside the strategic petroleum reserve fell by 26 million barrels between June 30 and December 6, according to data from the U.S. Energy Information Administration (EIA).
Commercial inventories depleted more than twice as fast as the prior ten-year seasonal average - by the most since 2020 and before that 2017, previous periods that were also characterised by OPEC⁺ restraint.
In consequence, stocks were 20 million barrels (-4% or -0.51 standard deviations) below the seasonal average on December 6 with the deficit widening from 5 million barrels (-1% or -0.09 standard deviations) on June 30.
The seasonal deficit was the widest for almost two and a half years since the second quarter of 2022.
Depletion has been concentrated at refineries and tank farms along the Gulf of Mexico (-18 million barrels) and around the delivery point for the NYMEX futures contract at Cushing in Oklahoma (-11 million).
These are the regions most closely intertwined with the international market and with the highest proportion of speculative rather than operational storage.
Stocks in the rest of the country actually increased by more than 3 million barrels over the same period.
On the fuel side, combined inventories of gasoline, jet fuel and distillate fuel oil have also depleted by 14 million barrels since June, much faster than normal for the time of year.
As a result, combined fuel inventories are roughly 16 million barrels below the prior ten-year seasonal average so far in December with the deficit widening from an average of 10 million barrels in June.
Chartbook: U.S. oil inventories and prices
So far, the steady erosion of crude and fuel inventories has not provided much obvious support to prices.
Inflation-adjusted front-month U.S. crude futures have averaged $69 per barrel so far in December (36th percentile for all months since 2000) down from a recent high of $86 (55th percentile) in April 2024.
In real terms, prices are at the lowest level for nearly four years since January 2021, more than a year before Russia’s full-scale invasion of Ukraine in February 2022.
But relatively prices have likely curbed new well drilling and contributed to slower growth in U.S. oil production.
Crude production from the Lower 48 states excluding federal waters in the Gulf of Mexico has risen at an annual rate of 0.4 million barrels per day (b/d) in recent months down from 0.9 million b/d in early 2023.
Without the repeated extension of production limits by Saudi Arabia and its OPEC⁺ partners, inventories would have been higher and prices even lower.
By draining inventories, Saudi Arabia and its OPEC⁺ partners have arrested the price drop and averted a deeper slowdown in shale production, but at the cost of conceding even more of their own market share.
Related newsletters:
- Brent draws hedge fund interest as OPEC⁺ postpones output increase (December 9, 2024)
- U.S. gasoline attracts hedge funds as stocks dwindle (November 25, 2024)
- U.S. oil and gas output squeezed by lower prices (October 1, 2024)
- Falling U.S. crude inventories keep futures in backwardation for now (September 26, 2024)
Kemp: U.S. oil inventories fall as OPEC⁺ extends output curbsemp:
Re: Kemp: U.S. oil inventories fall as OPEC⁺ extends output curbsemp:
UBS Capital Markets' analyst believes that the global oil market is tighter than most of the Wall Street Gang believes. He sees higher oil prices coming in 2025 even without significant sanctions against Iran and Venezuela.
https://www.msn.com/en-us/money/markets/fundamentals-will-take-control-of-the-oil-market-ubs-analyst-says/vi-AA1vIDh3
https://www.msn.com/en-us/money/markets/fundamentals-will-take-control-of-the-oil-market-ubs-analyst-says/vi-AA1vIDh3
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Kemp: U.S. oil inventories fall as OPEC⁺ extends output curbsemp:
Here is what is really amazing:
"Commercial inventories depleted more than twice as fast as the prior ten-year seasonal average - by the most since 2020 and before that 2017, previous periods that were also characterised by OPEC⁺ restraint.
In consequence, stocks were 20 million barrels (-4% or -0.51 standard deviations) below the seasonal average on December 6 with the deficit widening from 5 million barrels (-1% or -0.09 standard deviations) on June 30.
The seasonal deficit was the widest for almost two and a half years since the second quarter of 2022."
And yet,
"Inflation-adjusted front-month U.S. crude futures have averaged $69 per barrel so far in December (36th percentile for all months since 2000) down from a recent high of $86 (55th percentile) in April 2024.
In real terms, prices are at the lowest level for nearly four years since January 2021, more than a year before Russia’s full-scale invasion of Ukraine in February 2022."
"Commercial inventories depleted more than twice as fast as the prior ten-year seasonal average - by the most since 2020 and before that 2017, previous periods that were also characterised by OPEC⁺ restraint.
In consequence, stocks were 20 million barrels (-4% or -0.51 standard deviations) below the seasonal average on December 6 with the deficit widening from 5 million barrels (-1% or -0.09 standard deviations) on June 30.
The seasonal deficit was the widest for almost two and a half years since the second quarter of 2022."
And yet,
"Inflation-adjusted front-month U.S. crude futures have averaged $69 per barrel so far in December (36th percentile for all months since 2000) down from a recent high of $86 (55th percentile) in April 2024.
In real terms, prices are at the lowest level for nearly four years since January 2021, more than a year before Russia’s full-scale invasion of Ukraine in February 2022."