Crude oil prices are getting a wake-up call after a lowering of the U.S. oil production outlook--a report of a major drop in U.S. oil supply and a warning by S&P to oil majors cut to back more and reduce debt levels or face downgrades.
Crude oil is rising on peak oil concerns. OK, not the old failed ideology of “peak oil” but the fact that U.S. oil supply in the U.S. may have peaked as well as Exxon Mobil’s proven reserve. The American Petroleum Institute in its weekly report said we had the first crude oil drawdown of the year and the biggest draw in Cushing, Olka., since April of last year.
Inventories up, and inventories down. Crude oil prices are conflicted about rising U.S. oil inventories versus a dramatic drop in global oil inventories. While the EIA reported a 2.8 million barrel increase, a report by Bernstein Energy is showing that global oil inventories have fallen by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter.
Today the EIA released their latest Short Term Energy Outlook Report, which shows that U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.9 million b/d in 2016 and 8.8 million b/d in 2017.
Crude oil prices are roaring back as earth-shaking developments rock the markets: The Organization of the Petroleum Exporting Countries vows to follow through with a production cut, Hillary Clinton gets an all-clear from the Federal Bureau of Investigations and an earthquake in Cushing, Okla.--the major oil storage hub that is the delivery point for the West Texas Intermediate contract.
The enerygy complex is trading lower after the EIA released its latest weekly oil inventory report. The data showed Total Crude & Product stocks increased by 9.047/mmbls to 1340.731/mmbls for week ending Oct 28. Looking at the year-on-year for Total Crude & Product stocks we see we are now 70.2/mmbls above last year’s level for this time of the year and above the five-year average by 229.1/mmbls.
Crude oil prices hit a new high for the year as refinery runs and imports hit lows for the year. The Energy Information Administration (EIA) reported a 5.2 million barrel drop in crude oil supply even as U.S. refinery runs fall to 85% of their operable capacity--the low for the year. Refiners ran a mere 15.4 million barrels of oil a day while overall product demand is running more than 20 million barrels a day.
It was not just the hurricanes that impacted supply as a reported 703,000 barrel drop in Cushing, Okla., helped reduce supply as well. We know that supply will rebound in the coming weeks and the number is supportive but the drawdown in Cushing, Oklahoma is supportive as well. The API also reported a 2.34 million barrel drop in gasoline supply as well as a 944,000 barrel increase in distillate stocks.
Crude oil prices had a second day snapback taking the crude market back out of bear territory and getting crowded out shorts to run for cover. Oil prices found support from the UK stimulus but also from a report from the private forecaster Genscape that showed supply in the Cushing, Okla., delivery point fell yet again.