Oil Price - May 5
Posted: Sat May 05, 2018 8:14 am
For the week ending May 4, 2018:
WTI crude rose US$0.81 to US$68.54 a barrel, up 1.20% on the week.
Brent, the global benchmark for oil, decreased US$0.79 to US$73.68 a barrel, reflecting a loss of 1.06% on the week.
From Gaffney Cline Blog dated 5-4-2018
Supply/Demand in the U.S.
US crude oil refinery inputs averaged 16.6 million barrels per day, with refineries at 91.1% of their operating capacity last week. This is 60,000 barrels per day less than the previous week’s average.
US gasoline demand over the past four weeks was 9.3 million barrels, up 1.2% from a year ago. Total commercial petroleum inventories increased by 5.4 million barrels last week.
On the supply side, EIA data indicated that total domestic crude production increased 33,000 barrels to 10,619 million barrels a day. The Lower 48 crude production now stands at 10,110 million barrels per day, an increase of 25,000 barrels this week.
US crude imports averaged 8.5 million barrels per day last week, up by 80,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.4 million barrels per day, 2.2% more than the same four-week period last year.
US crude exports averaged 2.148 million barrels per day last week, a decrease of 183,000 barrels per day from the previous week. Over the last four weeks, crude oil exports averaged 1.858 million barrels per day, 152.5% more than the same four-week period last year.
Crude oil inventories increased 6.2 million barrels from the previous week. The crude stored at Cushing (the main price point for WTI) increased 0.4 million barrels; total stored is 35.8 million barrels (~39% utilization).
Global Supply/Demand
Better-than-expected global demand strength, in hand with OPEC production cuts, and tightened global [supply and demand] balances are paving the way for higher crude prices in the near term. The spread between Brent, the benchmark for crude in Europe, and WTI, the benchmark for crude in North America, has been widening. Earlier last week, WTI crude was trading at a US$4.97-discount to Brent; it is trading at a discount of US$5.17 and it might go wider still, because of the Permian basin bottleneck in pipeline infrastructure.
A headwind for oil markets has been the idea that Permian shale production will flood the market and knock prices from the US$60-70 level back down to US$50. However, that headwind has now turned into a tailwind for Brent and global crudes because of pipeline takeaway capacity constraint in the Permian basin.
Rising oil prices over the last two years have put the issue of demand destruction back in focus, as producers, traders and analysts try to estimate how consumers will respond. Demand destruction normally becomes a topic of discussion during this stage of the price cycle, and the current discussion resembles previous episodes of high and rising prices in 2005-2008 and 2011-2014.
There is a continuum of consumer responses to price - ranging from demand stimulation to demand destruction. The lower prices fall and the longer they are expected to stay there, the more consumption tends to be stimulated. The higher prices rise and the longer they are predicted to stay up, the more consumption tends to be destroyed.
The escalation of oil prices since the start of 2016 has probably started to restrain consumption growth (compared with a baseline in which prices had remained at US$30 per barrel). The demand restraint from increasing prices has been offset by synchronized global growth. If prices continue to increase, however, there will come a point at which consumption growth starts to slow in a much more pronounced fashion.
Experience suggests the extent of the demand deceleration will only become apparent after it is already well underway. In addition, the slowdown in consumption growth will continue even once prices stop rising, given the long lags in the system.
Between 2011 and 2014, when oil prices averaged over US$100 per barrel, declining consumption in the OECD and slowing consumption growth in the non-OECD created the conditions for the last oil slump. If oil prices continue to increase, the same scenario could play out again between 2019 and 2021.
WTI crude rose US$0.81 to US$68.54 a barrel, up 1.20% on the week.
Brent, the global benchmark for oil, decreased US$0.79 to US$73.68 a barrel, reflecting a loss of 1.06% on the week.
From Gaffney Cline Blog dated 5-4-2018
Supply/Demand in the U.S.
US crude oil refinery inputs averaged 16.6 million barrels per day, with refineries at 91.1% of their operating capacity last week. This is 60,000 barrels per day less than the previous week’s average.
US gasoline demand over the past four weeks was 9.3 million barrels, up 1.2% from a year ago. Total commercial petroleum inventories increased by 5.4 million barrels last week.
On the supply side, EIA data indicated that total domestic crude production increased 33,000 barrels to 10,619 million barrels a day. The Lower 48 crude production now stands at 10,110 million barrels per day, an increase of 25,000 barrels this week.
US crude imports averaged 8.5 million barrels per day last week, up by 80,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.4 million barrels per day, 2.2% more than the same four-week period last year.
US crude exports averaged 2.148 million barrels per day last week, a decrease of 183,000 barrels per day from the previous week. Over the last four weeks, crude oil exports averaged 1.858 million barrels per day, 152.5% more than the same four-week period last year.
Crude oil inventories increased 6.2 million barrels from the previous week. The crude stored at Cushing (the main price point for WTI) increased 0.4 million barrels; total stored is 35.8 million barrels (~39% utilization).
Global Supply/Demand
Better-than-expected global demand strength, in hand with OPEC production cuts, and tightened global [supply and demand] balances are paving the way for higher crude prices in the near term. The spread between Brent, the benchmark for crude in Europe, and WTI, the benchmark for crude in North America, has been widening. Earlier last week, WTI crude was trading at a US$4.97-discount to Brent; it is trading at a discount of US$5.17 and it might go wider still, because of the Permian basin bottleneck in pipeline infrastructure.
A headwind for oil markets has been the idea that Permian shale production will flood the market and knock prices from the US$60-70 level back down to US$50. However, that headwind has now turned into a tailwind for Brent and global crudes because of pipeline takeaway capacity constraint in the Permian basin.
Rising oil prices over the last two years have put the issue of demand destruction back in focus, as producers, traders and analysts try to estimate how consumers will respond. Demand destruction normally becomes a topic of discussion during this stage of the price cycle, and the current discussion resembles previous episodes of high and rising prices in 2005-2008 and 2011-2014.
There is a continuum of consumer responses to price - ranging from demand stimulation to demand destruction. The lower prices fall and the longer they are expected to stay there, the more consumption tends to be stimulated. The higher prices rise and the longer they are predicted to stay up, the more consumption tends to be destroyed.
The escalation of oil prices since the start of 2016 has probably started to restrain consumption growth (compared with a baseline in which prices had remained at US$30 per barrel). The demand restraint from increasing prices has been offset by synchronized global growth. If prices continue to increase, however, there will come a point at which consumption growth starts to slow in a much more pronounced fashion.
Experience suggests the extent of the demand deceleration will only become apparent after it is already well underway. In addition, the slowdown in consumption growth will continue even once prices stop rising, given the long lags in the system.
Between 2011 and 2014, when oil prices averaged over US$100 per barrel, declining consumption in the OECD and slowing consumption growth in the non-OECD created the conditions for the last oil slump. If oil prices continue to increase, the same scenario could play out again between 2019 and 2021.