Energy Prospectus

It is becoming increasingly apparent this week that supply losses from the Alberta wildfires (impact estimates range from 1.0 to 1.4 million b/d) are going to be considerably longer in duration following a second round of evacuations and plant closures midweek at oil-sands assets north of Fort McMurray. Flames are reportedly encroaching on some of the biggest oil-sands mines and production facilities, including ones operated by Suncor and Syncrude Canada although to date no plant damage has been reported. Today Syncrude extended its force majeure on crude production and informed customers to expect no further shipments this month. Late yesterday Alberta officials said that residents of Fort McMurray could return home as early as June 1st but uncertainty remains due to poor air quality and the shifting nature of the still growing 1,900 square mile fire. Also key to the normalization of oil sands production activity are the state of the work camps where most employees reside. One worker camp burned yesterday but so far the balance remains unscathed. Cooler and wetter weather over the weekend is expected to slow the fire and lessen the supply threat.

In its latest monthly report, the American Petroleum Institute (API) today reported that US gasoline demand last month hit a record for April at 9.37 million b/d, up 2.5% year-on-year. Distillate demand averaged 4 million b/d, an increase of 1% from 2015. Total petroleum products demand hit 19.7 million, the highest for April since 2008. The API cited low prices as the key impetus behind the record gasoline consumption. The API pegged April crude production at 8.94 million b/d, a decrease of 694,000 b/d versus April 2015. Production of NGLs in April was up 23,000 b/d year-on-year to 3.34 million b/d.
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As I have posted here many times, at the end of the last big oil price cycle (2008-2010) the EIA and IEA grossly underestimated the impact on demand of low fuel prices. I think they are doing it again and I believe each month the agencies will be raising their demand forecasts for oil. "They call them cycles for a reason" and the BIG ONES always overshoot the mark. Get ready to hear the words "shortage" and "supply crisis" a lot in 2017. - Dan

The EIA (U.S. Energy Information Administration) released its weekly petroleum report on May 18, 2016. It reported that US crude oil production fell by 11,000 bpd (barrels per day) to 8.8 MMbpd (million barrels per day) for the week ending May 13, 2016—compared to the previous week. The crude oil production fell by 0.12% week-over-week. It’s also down by 6% year-over-year. The US crude oil production has fallen for 16 straight weeks.

The rate of decline is expected to accelerate this summer at the same time demand for refined products is expected to spike.