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February 2022 OPEC Monthly Oil Market Report “MOMR”, Released 2/10/2022
2/2022 MOMR PDF: https://momr.opec.org/pdf-download/res/pdf_delivery.php?secToken2=23f509343ff63d5666deceb2b56ded2e4c658dcc
2/2022 MOMR VIDEO (should follow later today): https://www.opec.org/opec_web/en/publications/338.htm
WTI $91.20/bbl Up 1.72% - March Contract, 12:58 am CDT 2/10/2022 : https://oilprice.com/oil-price-charts/45
Oil Market Highlights
Crude Oil Price Movements
Crude oil spot prices rebounded in January, compared to the previous month, as oil futures markets surged. Crude prices were supported by strong global oil market fundamentals amid dissipating fears about the impact of the COVID-19 Omicron variant and geopolitical risks, which raised concerns about near-term oil supply. The OPEC Reference Basket increased $11.03, or 14.8%, to settle at $85.41/b in January, its highest monthly value since September 2014. Similarly, crude oil futures prices increased on both sides of the Atlantic with the ICE Brent front month up $10.77, or 14.4%, in January to average $85.57/b and NYMEX WTI rising by $11.29, or 15.7%, to average $82.98/b. As a result, the Brent/WTI futures spread narrowed by 52¢ to an average of $2.59/b. The market structure of all three crude benchmarks – ICE Brent, NYMEX WTI and DME Oman – strengthened significantly in January over the previous month as market perception of the outlook for the supply-demand balance improved. Hedge funds and other money managers turned more positive about oil prices, increasing net long positions to their highest level since last November.
World Economy
Results for 4Q21 have been reported for major economies, with particularly better-than-expected growth levels in the US and China. Consequently, the world GDP growth estimate for 2021 is revised up to 5.6% from 5.5% in the previous assessment. Global growth for 2022, however, remains unchanged at 4.2%. US GDP was reported at 5.7% for 2021, while the growth forecast for 2022 remains unchanged at 4%. Euro-zone economic growth for 2021 and 2022 remains at 5.2% and 3.9%, respectively. Japan’s economic growth forecast for 2021 and 2022 is unchanged at 1.8% for 2021 and 2.2% for 2022. China’s 2021 growth was reported at 8.1% and the forecast for 2022 remains at 5.6%. India’s forecast for 2021 is unchanged at 8.8%, while the 2022 forecast was revised up to 7.2% from 7% previously, taking into account the acceleration in growth levels in 2H21 and an expected carry-over into 1H22. Russia’s GDP growth forecast remains at 4% for 2021 and 2.7% for 2022. Brazil’s economic growth forecast for 2021 is unchanged at 4.7% and remains at 1.5% for 2022. Key uncertainties remain the spread of COVID-19 variants and the effectiveness of vaccines, as well as the pace of vaccine rollouts worldwide. Moreover, supply chain bottlenecks and sovereign debt levels in many regions, together with rising inflationary pressures and the responses of central banks, also require close monitoring.
World Oil Demand
World oil demand growth in 2021 is revised up slightly by 17 tb/d, reflecting the latest data trends across the regions, to now stand at 5.7 mb/d. Both 3Q21 and 4Q21 figures for OECD Americas are revised higher, mainly as a result of the better performance in the US, confirming the upward revisions taken last month. Overall, non-OECD growth in 2021 increased by 3.1 mb/d while the OECD recorded growth of 2.6 mb/d. In the OECD, the US continued to be the major driver of oil demand, recording growth of 1.6 mb/d. In 2022, oil demand growth is expected at 4.2 mb/d unchanged from last month, with OECD and non-OECD projected to grow by 1.8 mb/d and 2.3 mb/d, respectively. In the OECD, optimism arises from economic growth with the supportive effects of fiscal and monetary policies expected to more than offset the negative effects from Omicron on oil demand. Industrial activities are also anticipated to accelerate, boosting diesel demand. Meanwhile, mobility has recovered substantially with domestic, regional and international flights already showings signs of recovery.
World Oil Supply
Non-OPEC liquids supply growth in 2021 is revised down by 0.06 mb/d to around 0.6 mb/d y-o-y, to average 63.6 mb/d. An upward revision, mainly to the US, was offset by downward revisions in the supply forecasts of other countries such as Brazil, China, Canada, Ecuador and the UK due to unexpected lower output in 4Q21. The 2021 oil supply forecast primarily sees growth in Canada, Russia, the US, China, Guyana, Argentina, Qatar and Norway, while output is projected to decline in the UK, Brazil, Colombia and Indonesia. For 2022, non-OPEC supply growth remained unchanged at 3.0 mb/d y-o-y, to average 66.6 mb/d. The main drivers of liquids supply growth are expected to be the US and Russia, followed by Brazil, Canada, Kazakhstan, Norway and Guyana. OPEC NGLs are forecast to grow by 0.1 mb/d both in 2021 and 2022 to average 5.1 mb/d and 5.3 mb/d, respectively. In January, OPEC crude oil production increased by 0.06 mb/d m-o-m, to average 27.98 mb/d, according to available secondary sources.
Product Markets and Refining Operations
Refinery margins on the US Gulf Coast versus WTI and in Singapore versus Oman showed strong performance in January, gaining $1.42/b and 50¢/b, respectively, m-o-m, as global product inventory levels reached multi-year lows. However, in Europe refinery margins lost $1.20/b versus Brent, as they were affected not only by higher crude prices, but also record-high natural gas prices, as nearly 80% of all European refineries depend on natural gas to power their plants. In all regions, the strongest positive margin contributor was gasoil, as inventories for that product continued to fall, leading to a higher premium relative to crude oil. At the same time, preliminary data shows global refinery runs rose only slightly, limited by a winter storm that affected operations in parts of the US, hampering a higher upturn in total refinery intakes.
Tanker Market
Coming off a year that saw multi-decade lows, dirty tanker spot freight rates began 2022 close to the bottom end of the five-year range, even as rising bunker fuel prices weighed on earnings. VLCC rates in particular continued to languish in the doldrums while Suezmax and Aframax rates came down from an improved performance at the end of last year. Clean spot freight rates also experienced a similar decline from a slight lift seen at the end 2021 driven by heating demand and weather-related delays that reduced tanker availability.
Crude and Refined Products Trade
Preliminary data shows US crude imports rose 3% m-o-m in January to average 6.5 mb/d, the highest since June 2021. US crude exports fell to the lowest since December 2018, averaging 2.4 mb/d in January. US product imports and exports fell to the lowest since May 2020, the month hit hardest by the pandemic. Meanwhile, the latest data for China shows the country’s crude imports continued to recover from lows seen in October to reach a nine-month high of 10.9 mb/d in December. China’s product exports contracted 24%, m-o-m, in December to the lowest since January 2017, amid government directives to limit the outflow of clean products. India’s crude imports averaged 4.6 mb/d in December, the highest for the year, as refiners looked toward higher runs in 1Q22. India’s product exports reached levels last seen in April 2020, with increases across all major products, except jet fuel, which remained at the still-high level seen in the previous month. Japan’s crude imports have seen a 26% increase over the last two months to average 3.0 mb/d, the highest since December 2019, amid higher refinery runs to meet winter demand and increased use of crude for direct burning.
Commercial Stock Movements
Preliminary December data shows total OECD commercial oil stocks down by 31.2 mb m-o-m. At 2,725 mb, inventories were 311 mb lower than the same time a year earlier, 210 mb lower than the latest five-year average, and 202 mb below the 2015-2019 average. Within components, crude and products stocks fell m-o-m by 18.3 mb and 12.9 mb, respectively. At 1,330 mb, crude stocks in the OECD were 99 mb less than the latest five-year average and 100 mb below the 2015-2019 average. OECD product stocks stood at 1,395 mb, representing a deficit of 111 mb compared with the latest five-year average and 102 mb below the 2015-2019 average. In days of forward cover, OECD commercial stocks in December rose by 0.1 day m-o-m to stand at 61.1 days. This is 10.6 days below December 2020 levels, 2.9 days less than the latest five-year average and 1.3 days lower than the 2015-2019 average.
Balance of Supply and Demand
Demand for OPEC crude in 2021 is revised up by 0.1 mb/d from the last month’s assessment to stand at 27.9 mb/d, around 5.0 mb/d higher than in 2020. Demand for OPEC crude in 2022 was also revised up by 0.1 mb/d from the last month’s report at 28.9 mb/d, around 1.0 mb/d higher than in 2021.
OPEC Featured Article - ‘Review of global oil demand trend‘, Released February 10, 2022
OECD Composite Leading Indicators News Release, Paris, February 9, 2022: https://www.oecd.org/sdd/leading-indicators/composite-leading-indicators-cli-oecd-02-2022.pdf
FEATURED ARTICLE: Review Of Global Oil Demand Trend
Global oil demand in 2021 saw a strong recovery, increasing by 5.7 mb/d, supported by a solid economic rebound. Oil demand growth was led by the non-OECD region, which saw an increase of 3.1 mb/d y-o-y, with China and India contributing the bulk of additional oil requirements. Oil demand in the OECD region also rebounded by a strong 2.6 mb/d y-o-y.
In the OECD, the Americas saw the largest growth among the sub-regions in 2021, growing by 1.7 mb/d, with gasoline leading in terms of product categories, and LPG even surpassing pre-pandemic levels. In OECD Europe, oil demand growth of 0.6 mb/d, y-o-y, was led by diesel for manufacturing and road transportation. OECD Asia Pacific grew by 0.4mb/d, y-o-y, and saw strong demand from manufacturing and petrochemicals.
In the non-OECD, China and India saw a strong economic recovery, supporting demand for industrial/petrochemical feedstock, including naphtha and LPG. Moreover, rebounding mobility in both countries supported healthy demand for gasoline and diesel, mainly in transportation. China’s oil demand grew by 1.0 mb/d y-o-y, while India saw an increase of 0.3 mb/d, y-o-y.
Looking ahead, global oil demand growth in 2022 is forecast at 4.2 mb/d to average 100.8mb/d, surpassing the level seen in 2019.
The OECD region is forecast to grow by 1.8 mb/d, although not yet reaching pre-pandemic levels in absolute volumes. OECD Americas is forecast to grow by 1.1mb/d, driven by a continued improvement in mobility, as well as accelerated manufacturing activity and demand for petrochemical feedstock, driving consumption of gasoline, diesel oil and LPG. In OECD Europe, an expected pick-up in regional, local and international air traffic is projected to support the jet/kerosene demand in the region, while solid manufacturing activities, particularly from Germany and other big economies in the region, are expected to drive the demand for diesel. Overall, growth in the region is forecast at 0.6 mb/d. In OECD Asia Pacific, Japan announced subsidies for gasoline, which along with a healthy petrochemical sector are anticipated to support oil demand. The region is projected to grow by 0.2 mb/d in 2022.
The non-OECD region is forecast to grow by 2.3 mb/d in 2022, surpassing the pre-pandemic level of 2019 by around 2 mb/d for total demand. Within the region, China, India and Other Asia are the main drivers, making up more than two-thirds of the growth volumes. In China, the ongoing return of mobility is forecast to back gasoline demand, which is projected to grow by around 0.2 mb/d y-o-y, with diesel and jet/kerosene adding support. India is similarly expected to see added mobility resulting in forecast y-o-y growth of roughly 0.2 mb/d for gasoline and 0.1 mb/d for jet/kerosene, with upwardly revised economic growth for the country supporting diesel growth of around 0.1 mb/d. Outside Asia, resumption of international travel is likely to be a key driver of oil demand in the Middle East, with expected total demand growth forecast at 0.3 mb/d. Latin America oil demand is driven mainly by diesel and gasoline with overall oil demand forecast to grow by 0.2 mb/d y-o-y.
The main challenges for 2022 remain the containment of the COVID-19 pandemic and any resulting restrictive measures, supply chain disruptions, inflation, and labour shortages that could dampen economic growth. Nevertheless, upside potential to the forecast prevails, based on an ongoing observed strong economic recovery with the GDP already reaching pre-pandemic levels, supported by fiscal stimulus, and global trade levels reaching an all-time high in volume terms. Moreover, mobility is expected to gain further momentum, particularly with regard to the travel and tourism sector. Given the experience of the past two volatile years, vigilant monitoring of pandemic developments, along with a highly flexible approach, will remain key to successfully maintaining oil market stability.
Oil inventories declined by 4.8 million barrels - EIA Weekly Petroleum Status Report, Release Date: 2/9/2022.
Full Report with Graphs: https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
WTI $89.47/bbl Up 0.12% - March Contract, 14:57 pm CDT 02/09/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
Summary of Weekly Petroleum Data for the week ending February 4, 2022
HIGHLIGHTS:
U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ending February 4, 2022 which was 328,000 barrels per day more than the previous week’s average. Refineries operated at 88.2% of their operable capacity last week. Gasoline production increased last week, averaging 9.4 million barrels per day. Distillate fuel production increased last week, averaging 4.7 million barrels per day.
U.S. crude oil imports averaged 6.4 million barrels per day last week, decreased by 0.7 million barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.6 million barrels per day, 12.7% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 514,000 barrels per day, and distillate fuel imports averaged 440,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.8 million barrels from the previous week. At 410.4 million barrels, U.S. crude oil inventories are about 11% below the five year average for this time of year. Total motor gasoline inventories decreased by 1.6 million barrels last week and are about 3% below the five year average for this time of year. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories decreased by 0.9 million barrels last week and are about 19% below the five year average for this time of year. Propane/propylene inventories decreased by 1.9 million barrels last week and are about 11% below the five year average for this time of year. Total commercial petroleum inventories decreased by 8.1 million barrels last week.
Total products supplied over the last four-week period averaged 21.9 million barrels a day, up by 12.3% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.5 million barrels a day, up by 7.9% from the same period last year. Distillate fuel product supplied averaged 4.6 million barrels a day over the past four weeks, up by 9.9% from the same period last year. Jet fuel product supplied was up 30.4% compared with the same four-week period last year.
The West Texas Intermediate crude oil price was $92.27 per barrel on February 4, 2022, $4.60 above last week’s price and $35.47 more than a year ago. The spot price for conventional gasoline in the New York Harbor was $2.726 per gallon, $0.121 more than last week’s price and $1.054 above a year ago. The spot price for No. 2 heating oil in the New York Harbor was $2.776 per gallon, $0.121 above last week’s price and $1.186 over a year ago.
The national average retail regular gasoline price increased to $3.444 per gallon on February 7, 2022, $0.076 above last week’s price and $0.983 over a year ago. The national average retail diesel fuel price increased to $3.951 per gallon, $0.105 per gallon more than last week’s price and $1.150 higher than a year ago.by 4.8 million barrels - EIA Weekly Petroleum Status Report, Release Date: 2/9/2022.
February 2022 (MER) Monthly Economic Review
Source: Jack Kleinhenz, Ph.D., CBE Chief Economist National Retail Federation
For a clearer narrative click link to view graphs and full report: https://cdn.nrf.com/sites/default/files/2022-01/2022%20February%20Monthly%20Ecomonic%20Review.pdf
SYNOPSIS | A New Economic Expansion is Underway:
Coming up on two years since the end of the brief recession caused by the pandemic, we appear to be at the middle of the current economic cycle. The maturing economy remains in growth mode and there is good reason to expect it will soon approach normal trends. Despite ongoing challenges, we are clearly still in an expansion phase. The question is how long it will last as policymakers try to strike a delicate balance between encouraging growth and taming inflation.
Economic cycles go from expansion to contraction and then back again, with both phases usually taking place over a period of several years. From 1945 to 2019, the National Bureau of Economic Research defined 11 cycles lasting on average a bit longer than five and a half years. The most recent pre-pandemic cycle began in 2008-2009 and lasted about 12 years before it was ended by the 2020 recession.
Unlike the gradual pace of most economic cycles, COVID-19 brought such a shock to the economy that we experienced an amazingly squeezed mini-cycle in early 2020 — a quick, deep decline followed by a fast, steep recovery. Last year, the NBER said the recession sparked by the pandemic had ended in April 2020, just two months after it had begun in February 2020. That made it the shortest recession in U.S. history, even briefer than a six-month recession seen during the 1980s. The NBER traditionally defines a recession as a decline lasting “more than a few months.” But the bureau declared the 2020 downturn a recession despite its short length because there had been such an unprecedented magnitude of decline in employment and production and such broad reach across the entire economy.
Why does this matter? Understanding the expansion-recession-resurgence characteristics of an economic cycle helps point to appropriate policy paths. Our nation is currently in the process of policy normalization, and the key to extending the expansion is to balance growth, inflation and interest rates. Strong growth without inflation is the ideal scenario, but that is not the case today.
Clearly, this expansion is different from the last, and the policy approach will be different. Inflation is higher and may prove to be more persistent than expected, growth is well above trend, and the labor market is tight. When the Federal Reserve last began economic tightening by raising interest rates in December 2015, policy considerations were substantially different from those in play today. Gross domestic product growth was under 2 percent, inflation was under 1 percent and the unemployment rate was at 5 percent.
By contrast, GDP grew an impressive 6.9 percent in the fourth quarter of 2021, up from 2.3 percent in the third quarter. As a result, real GDP was up 5.7 percent for the year, the fastest growth for any calendar year since 1984. Unlike other periods of robust economic growth, 2021 was artificially boosted by massive government stimulus, particularly early in the year. Fourth-quarter household spending was slower than in the first half of the year but still accelerated. Omicron occurred late in the fourth quarter and was not a major restraint on growth, although it will be a temporary drag during the first quarter this year. Looking forward, the economy should be at or near full employment in the first quarter and inflation is expected to slow but still rise 3.6 percent. For all of 2022, I expect GDP to grow between 3 percent and 4 percent, still faster than the 2.3 percent annual pace during the previous expansion and the economy’s long-term trend.
It has been over four months since federal stimulus in the form of temporary supplemental unemployment benefits ended, but the economy is still running hotter than it has in a long time. Monetary policy will be completely different in 2022 as the Fed shifts direction from accommodation to tightening. The economy is sturdy enough to stand on its own and can sustain itself toward a growth environment without the pandemic stimulus and monetary policy of the past two years. Excess liquidity growth has likely switched from a tailwind to a headwind in 2022 as increased spending and demand have led to inflation. But relief from inflation should come as the result of less accommodative monetary policy in the form of higher interest rates planned by the Fed for 2022.
Against this backdrop, it will be interesting to determine spending trends and what might stymie spending. It is important to keep in mind that in the past, the Fed has only tightened its policy when the economy was doing well, as it is today. It is not clear how Fed policy will develop and there will be indigestion as we adjust to new policies. But both businesses and households are fundamentally in good financial shape and COVID- 19 is having less of an impact on economic activity despite its ongoing concern as a health issue.
The Fed indicated just last week that it expects to begin raising its benchmark interest rates going forward, and there is plenty of room to raise rates without threatening the economy. The Fed’s goal is to increase the cost of credit across the board. Higher interest rates will make car, student and home mortgage loans more expensive for consumers, and everyone will end up spending more on interest payments.
Nonetheless, households are poised to continue to spend due in part to the cash savings accrued during the pandemic. In addition to shopping, Americans are returning to pre-pandemic behavior like eating out, traveling and attending entertainment events, so more industries will be able to fully reopen and a good portion of those savings will return to the economy as COVID-19 dissipates. In turn, there will be a record number of jobs to fill, leading to higher wages and continued increases in consumer spending.
The Fed wants to be flexible in how and when it raises rates as it needs to be positioned to respond to a full range of circumstances. There are many risks we are keeping our eyes on, including inflation, taxes, interest rates, COVID-19 policies and more. With less fiscal support and the Fed combating inflation, 2022 could see considerable tightening of financial conditions that could conceivably shorten the economic cycle. The key is to bring inflation under control without artificially bringing on another contraction before its time.
The USA is going to need GOM gas (and oil) for a long time.
https://www.americanthinker.com/articles/2022/02/the_inconvenient_truth_about_electric_vehicles.html
Mrs. Smith
Federal Reserve Bank of Dallas ”Energy Slideshow”, Updated February 3, 2022
See link below for slideshow charts on Energy Prices, Global Petroleum Data, National Outlook Data, and Regional Activity:
https://www.dallasfed.org/-/media/Documents/research/energy/energycharts.pdf?la=en
Mrs. Smith
February 2022 EIA Short-term Energy Outlook “STEO” Forecast: Release Date: February 8, 2022 | Forecast Completed: February 3, 2022 | Next Release Date: March 8, 2022.
Another Big Note: EIA continues to increase WTI “average” price per barrel on their 2022 Short-term Energy Outlook (STEO). The EIA’s 2/2022 STEO forecast for WTI “average” price per barrel increased 11.26% from $71.32/bbl to $79.35/bbl. The EIA’s 2/2022 STEO forecast for Brent “average” price per barrel increased 10.57% from $74.95/bbl to $82.87/bbl.
FULL REPORT WITH EXCELLENT GRAPHS: https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf
ALL FIGURES AND DATA: https://www.eia.gov/outlooks/steo/data.php?type=figures
WTI $89.86/bbl Up 0.56% - March Contract, 14:39 pm CDT 09/02/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
FORECAST HIGHLIGHTS:
Global liquid fuels
* The February Short-Term Energy Outlook (STEO) assumes U.S. GDP grew by 5.7% in 2021 and will grow by 4.2% in 2022 and by 2.8% in 2023. We use the IHS Markit macroeconomic model to generate our U.S. economic assumptions. Global macroeconomic assumptions in this forecast are from Oxford Economics and include global GDP growth of 4.4% in 2022 and 4.0% in 2023, compared with growth of 5.8% in 2021. A wide range of potential macroeconomic outcomes could significantly affect energy markets during the forecast period. In addition, the evolving effects of consumer behavior on energy demand because of the pandemic present a wide range of potential outcomes for energy consumption. Supply uncertainty in the forecast results from the potential for disruptions, the production decisions of OPEC+, and the rate at which U.S. oil and natural gas producers increase drilling.
* Brent crude oil spot prices averaged $87 per barrel (b) in January, a $12/b increase from December 2021. Crude oil prices have risen steadily since mid-2020 as result of consistent draws on global oil inventories, which averaged 1.8 million barrels per day (b/d) from the third quarter of 2020 (3Q20) through the end of 2021. We estimate that global oil inventories fell further in January—compared with our expectation of an increase in last month’s STEO—and that commercial inventories in the OECD ended the month at 2.68 billion barrels, which is the lowest level since mid-2014. Oil prices have also risen as result of heightened market concerns about the possibility of oil supply disruptions, notably related to tensions regarding Ukraine, paired with receding market concerns that the Omicron variant of COVID-19 will have widespread effects on oil consumption.
* We expect Brent prices will average $90/b in February as continuing draws in global oil inventories in our forecast keep crude oil prices near current levels in the coming months. However, we expect downward price pressures will emerge in the middle of the year as growth in oil production from OPEC+, the United States, and other non-OPEC countries outpaces slowing growth in global oil consumption. This dynamic leads to rising global oil inventories from 2Q22 through the end of 2023, and we forecast the Brent spot price will fall to an average of $87/b in 2Q22 and $75/b in 4Q22. We expect the Brent price will average $68/b for all of 2023. However, low inventory levels create an environment for potentially heightened crude oil price volatility and potential risk for prices to rise significantly if supply growth does not keep pace with demand growth. Global supply chain disruptions have also likely exacerbated inflationary price effects across all sectors in recent months. How central banks respond to inflation may affect economic growth and oil prices during the forecast period.
* We estimate that 99.0 million b/d of petroleum and liquid fuels was consumed globally in January 2022, an increase of 6.6 million b/d from January 2021. We forecast that global consumption of petroleum and liquid fuels will average 100.6 million b/d for all of 2022, which is up 3.5 million b/d from 2021 and more than the 2019 average of 100.3 million b/d. We forecast that global consumption of petroleum and liquid fuels will increase by 1.9 million b/d in 2023.
* U.S. regular gasoline retail prices averaged $3.31 per gallon (gal) in January, unchanged from December 2021 and up 98 cents/gal from January 2021. Retail diesel prices averaged $3.72/gal in January, up 8 cents/gal from December and up $1.04/gal from last January. Product prices have risen compared with year-ago levels because of rising crude oil prices and high refining margins. We expect diesel prices will average $3.49/gal from 2Q22 through 4Q22. The forecast decline in prices reflects our expectation of falling crude oil prices, particularly in the second half of 2022 (2H22), as well as lower refining margins as refineries increase throughputs in the coming months.
* U.S. crude oil production reached almost 11.8 million b/d in November 2021 (the most recent monthly historical data point), the most in any month since April 2020. We forecast that production will rise to an average of 12.0 million b/d in 2022 and 12.6 million b/d in 2023, which would be record-high production on an annual-average basis. The previous annual average record of 12.3 million b/d was set in 2019.
Natural Gas
* In January, the natural gas spot price at Henry Hub averaged $4.38 per million British thermal units (MMBtu), up from the December average of $3.76/MMBtu. Higher prices in January were a result of colder-than-normal weather in parts of the country, particularly the Northeast and the Midwest where demand increased for natural gas used for space heating and for power generation. STEO uses weather forecasts from the National Oceanic and Atmospheric Administration (NOAA), and NOAA published the forecast we used in this STEO in late January. Temperatures have continued to be cold in parts of the country in early February, which we expect will contribute to Henry Hub prices averaging $4.70/MMBtu for the month. The winter weather forecasts are highly variable and create a significant amount of uncertainty in our price forecast. In addition, global demand for U.S. liquefied natural gas (LNG) has remained high, limiting some of the downward pressure on natural gas prices. We expect natural gas prices could remain volatile over the coming months, and the way that temperatures affect natural gas demand in February and March will be a key driver of how inventories end the withdrawal season, which will be important for natural gas price formation in the coming months.
* We estimate that U.S. LNG exports averaged 11.2 billion cubic feet per day (Bcf/d) in January 2022, up from 10.4 Bcf/d in 4Q21, supported by large price differences between the Henry Hub price in the United States and spot prices in Europe and Asia. In particular, inventories in Europe remain much lower than their five-year averages and are contributing to strong demand for LNG imports. We expect high levels of U.S. LNG exports to continue into 2022, averaging 11.3 Bcf/d for the year, a 16% increase from 2021. The forecast reflects our assumptions that global natural gas demand remains strong and that expected additional U.S. LNG export capacity comes online.
* Colder-than-normal temperatures in January resulted in U.S. natural gas inventories falling below the five-year average to end the month at 2.3 trillion cubic feet (Tcf). We expect natural gas inventories to fall by about 730 Bcf for the rest of the withdrawal season, ending March just below 1.6 Tcf, which would be 8% less than the 2017–21 average for that time of year.
* We expect U.S. consumption of natural gas will average 105.2 billion cubic feet per day (Bcf/d) in February, down 3% from February 2021. Consumption in our forecast declines the most in the residential and commercial sectors, where consumption will average a combined 43.8 Bcf/d, down 10% from last February. We forecast electric power section consumption will be 27.8 Bcf/d in February, down 1% from last February. The changes are partly offset by industrial sector consumption, which grows by 4% from February 2021 in the forecast to average 24.8 Bcf/d for the month.
* We estimate dry U.S. natural gas production averaged 95.5 Bcf/d in the United States in January, down 2.1 Bcf/d from December 2021. Production in January was lower due, in some part, to freezing temperatures in certain production regions. We forecast natural gas production to average 95.6 Bcf/d in February and 96.1 Bcf/d for all of 2022, driven by natural gas and crude oil price levels that we expect will be sufficient to support enough drilling to sustain production growth. We expect production to rise to an average of 98.0 Bcf/d in 2023.
Electricity, coal, renewables, and emissions
* We forecast that the share of U.S. electric power sector generation produced by natural gas will average 35% in 2022 and 2023, down from 37% in 2021. The estimated cost of natural gas delivered to power generators averaged $4.97/MMBtu in 2021, and we expect it to fall to $4.16/MMBtu in 2022 and $3.86/MMBtu in 2023. Despite the forecast decline in fuel costs, the share of electricity generation from natural gas declines in the forecast because of growth in renewable generation. We expect the renewable generation share to increase from 20% in 2021 to 22% in 2022 and 24% in 2023. Increasing renewable generation contributes to our forecast that the share of generation from coal will decline from 23% in 2021 to an average of 22% over the next two years. Forecast generation from nuclear remains relatively constant through the forecast at an average generation share of 20%.
* We expect U.S. coal production to increase by almost 28 million short tons (MMst) (5%) in 2022 to 606 MMst and then rise by 18 MMst (3%) in 2023. Producers in the Powder River Basin have increased employment at mines in recent months to boost production to meet domestic demand, but we expect tight supply conditions to remain through the remainder of the year. We expect U.S. coal consumption to decrease by 2 MMst in 2022 as a 5 MMst (1%) decline in consumption from the electric power sector is somewhat offset by a 2 MMst (14%) increase in consumption for coke plants. Exports are expected to increase by 3 MMst (4%) in 2022 because international prices continue to be high for U.S. coal.
* Planned additions to U.S. wind and solar capacity in 2022 and 2023 increase electricity generation from those sources in our forecast. We estimate that the U.S. electric power sector added 16.3 gigawatts (GW) of new wind capacity in 2021. We expect 7.6 GW of new wind capacity will come online in 2022 and 4.3 GW in 2023. Utility-scale solar capacity rose by an estimated 13.9 GW in 2021. Our forecast for added utility-scale solar capacity is 21.8 GW for 2022 and 24.1 GW for 2023. We expect solar additions to account for nearly half of new electric generating capacity in 2022. In addition, in 2021, small-scale solar capacity (from systems less than 1 megawatt) increased by 5.1 GW to 32.7 GW. We project that small-scale solar will grow by 4.4 GW per year in both 2022 and 2023.
* U.S. energy-related carbon dioxide (CO2) emissions increased by more than 6% in 2021 as economic activity increased and contributed to rising energy use. We expect a 2% increase in energy-related CO2 emissions in 2022, primarily from growing transportation-related petroleum consumption. Forecast energy-related CO2 emissions remain almost unchanged in 2023. We expect petroleum emissions to increase by 4% in 2022, and this growth rate slows to less than 1% in 2023. Natural gas emissions increase by 2% in 2022 and then decrease slightly in our forecast for 2023. We forecast that coal-related CO2 emissions will decline by 1% in 2022 and by 2% in 2023.
US Oil and Gas Rig Count up 3 reflecting 613 rigs as of 2/4/2022. The GOM Offshore Rig Count decreased by 2 from the previous week and is currently showing 16 rigs. Maybe one of those can move to the Tau. Laugh. Laugh.
https://rigcount.bakerhughes.com
https://rigcount.bakerhughes.com/static-files/a6a48176-6bbd-43c3-88f5-4bf0e247aeff
WTI $92.60/bbl - March Contract, 13:22 pm CDT 02/04/2022: https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 02/03/2022 Close
Crude Oil ($/barrel) Percent Change
WTI $90.17 +2.3
Brent $92.99 +1.7
Louisiana Light $92.32 +2.
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
BINGO!
I am perfectly fine with WTI resting in the $70-$80 per barrel range. Too, too large and no bueno if you know what I mean. One has to be able to afford it. For example, will all developing countries be able to with Brent @ $100/bbl?
Mrs. Smith
Update with respect to my post no. 5990: Bottom line, as of February 1, 2022, the Tau leases are still active, Delek Group remains a 75% Lessee, which means the annual ‘Delay Rental’ payments will have been made.
Post no. 5990 below:
1. The Tau BOEM lease G35244 “Annual Delay Rental” payment would have been made by July 1, 2021 “the first day of the lease year”.
2. The Tau BOEM lease G36121 “Annual Delay Rental” payment should have been made by November 1, 2021 “the first day of the lease year”.
3. Excerpt from Gulfslope and Delek January 1, 2018 “Participation Agreement”: “From and after the Effective Date of this Agreement the Parties shall pay, or cause to be paid, any delay rentals that become due under a Lease, as to periods from and after the Effective Date, in order to continue the Leases in full force and effect, and the Parties shall, within thirty (30) days after receipt of an invoice from the Operator, reimburse the Operator for its working interest share (for example, 75% as to Delek as opposed to the 90% carry) of any such delay rental payment covering the period from and after the Effective Date of this Agreement.
Notwithstanding anything to the contrary set forth in this Agreement or in any Joint Operating Agreement, from and after the time that a Party (i) elects not to participate in the drilling of an Exploratory Well on a Phase II Prospect, Phase III Prospect or a Subsequent Phase Prospect or (ii) elects to withdraw from a Prospect, thereafter such Party shall have no liability or responsibility for any portion of lease maintenance payments, including, without limitation, delay rentals, with respect to the Leases associated with any such Prospects.”
4. Note: As of January 3, 2022 BSEE still reflected the Tau leases as “active”, and Delek Group (Delek GOM Investments, LLC) as a BOEM Lessee.
Mrs. Smith
I suppose it could be a Gulfslope Energy sneak attack orchestrated by Mr. Seitz. We are all going about our day then BAM a Gulfslope news release, or not. It would not be the first time that maneuver has crossed my mind.
Mrs. Smith
WTI has now crossed over $90 a barrel. WTI setting a 7 year high @ $90.72/bbl March Contract, 19:36 pm CDT 02/03/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
“The investment environment for upstream oil & gas hasn't been this good in a long time and every day it keeps getting better - WTI $87, Brent tops $90”
AGREED
Wholesale Spot Petroleum Prices, 2/2/2022 Close
Crude Oil ($/barrel) Percent Change
WTI 88.16 -0.1
Brent 91.43 +1.3
Louisiana Light 90.21 -0.
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
Comment: (Here is more justification for many of the positions that have been presented by several posters on the board)…
https://oilprice.com/Energy/Crude-Oil/Big-Oil-Is-Quietly-Exploring-For-More-Crude.html
Excerpts from the article: ‘Big Oil is drilling. It’s just not talking about it’
“The majors are still exploring and say much less about it than they used to,” Andrew Latham, vice-president for exploration at Wood Mackenzie, told the FT’s Wilson this month. “You have to be a real specialist sector watcher to know these kinds of things [because] they don’t talk about it.”
Shell struck a potentially major deposit in Namibia earlier his month, according to reports. It wasn’t the company that announced the find. It was Reuters, citing unnamed sources in the know who said the government of the southern African country would make an official announcement this week.
Exxon continues to make find after find offshore Guyana. The latest update came earlier this month and was about plans to start pumping from a second platform in the Stabroek Block, which would boost the country’s oil output three times.
French TotalEnergies, formerly just Total, has been particularly active in new oil well drilling, even as it also ramps up renewable energy expansion. The French company drilled the most new exploration wells last year, according to Wood Mac data cited by the Financial Times, coming ahead of both Exxon, which was second, and Norway’s Equinor, which came in third.
For Exxon, it is mostly business as usual. The company has some activist shareholders on its tail but no court rulings obliging it to shrink its oil output, unlike Shell. It is perhaps this fact that makes the Shell case especially interesting. The supermajor was ordered by a Dutch court to slash its emissions footprint by 45 percent within ten years last year, and it said that its production had peaked anyway back in 2019.
Yet Shell is drilling—and not just drilling but doing it in a frontier region with no well-developed infrastructure or oil industry of any sort. This means higher investments should the find be confirmed. Why is Shell doing this?
Reserve replacement is one reason. Even with plans—and an obligation—to produce less oil in the future, the company is not completely giving up its core business. Oil demand, regardless of various forecasts, looks like it still has a few good decades in it. The costs of new wind and solar installations are rising, the supply of critical minerals and metals is limited, and new mine lead times are even longer than the lead times for offshore oil wells. This doesn’t bode well for the renewable revolution, but it does bode well for oil and gas demand.
Big Oil—and small and medium oil, too—is doing what any business would do in the current environment. Said environment suggests that the demand for Big Oil’s products is strong. Naturally, they would try to respond to that strong demand by producing as much as they can to satisfy it. But they won’t talk about it as openly as they used to before. Instead, they would highlight their investments in wind, solar, and EVs while quietly drilling to ensure there will be enough oil for tomorrow and the day after.
Oil inventories decreased by 1 million barrels - EIA Weekly Petroleum Status Report, Release Date: 2/2/2022
Full Report with Graphs: https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
WTI $88.86/bbl up 0.68% March Contract, 12:04 am CDT 02/03/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
Summary of Weekly Petroleum Data for the week ending January 28, 2022
HIGHLIGHTS:
U.S. crude oil refinery inputs averaged 15.2 million barrels per day during the week ending January 28, 2022 which was 248,000 barrels per day less than the previous week’s average. Refineries operated at 86.7% of their operable capacity last week. Gasoline production decreased last week, averaging 8.7 million barrels per day. Distillate fuel production decreased last week, averaging 4.6 million barrels per day.
U.S. crude oil imports averaged 7.1 million barrels per day last week, increased by 0.8 million barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.5 million barrels per day, 9.6% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 433,000 barrels per day, and distillate fuel imports averaged 250,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.0 million barrels from the previous week. At 415.1 million barrels, U.S. crude oil inventories are about 9% below the five year average for this time of year. Total motor gasoline inventories increased by 2.1 million barrels last week and are about 2% below the five year average for this time of year. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 2.4 million barrels last week and are about 19% below the five year average for this time of year. Propane/propylene inventories decreased by 4.3 million barrels last week and are about 12% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 5.8 million barrels last week.
Total products supplied over the last four-week period averaged 21.6 million barrels a day, up by 11.8% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.2 million barrels a day, up by 5.2% from the same period last year. Distillate fuel product supplied averaged 4.4 million barrels a day more than the past four weeks, up by 11.3% from the same period last year. Jet fuel product supplied was up 29.0% compared with the same four-week period last year.
The West Texas Intermediate crude oil price was $87.67 per barrel on January 28, 2022, $2.51 above last week’s price and $35.51 more than a year ago. The spot price for conventional gasoline in the New York Harbor was $2.605 per gallon, $0.119 more than last week’s price and $1.011 above a year ago. The spot price for No. 2 heating oil in the New York Harbor was $2.655 per gallon, $0.104 above last week’s price and $1.168 over a year ago.
The national average retail regular gasoline price increased to $3.368 per gallon on January 31, 2022, $0.045 above last week’s price and $0.959 over a year ago. The national average retail diesel fuel price increased to $3.846 per gallon, $0.066 per gallon more than last week’s price and $1.108 higher than a year ago.
The Tau 2 is effectively a different well design. The surface lease is still G35244 Ship Shoal block 336 but the well site is located in a different area. Gulfslope would have incorporated additional mitigation strategies for a successful Tau 2 drill well. Quote from Gulfslope “Tau No. 1 well significantly de-risked this potential oil and gas field”. A few on the board have already mentioned cutting-edge MPD systems, the size and weight of casing, BOPs, etc.
I suspect the expense to re-enter the well would be less than drilling a new one, but the mechanical risk would be much higher. The Tau 1 BSEE well activity report revealed the casing stings were cut and pulled including the conductor pipe. So it does not sound like an easy or economical re-entry, but I guess it could be done.
Quick Q. Could the Tau 2 just be taking a more productive path to the targets? One would think the bottom hole location has not changed. Reservoirs (M1 - M6) do not move, but the surface location of the wellbore can.
Mrs. Smith
The 2017-2022 (5) year Outer Continental Shelf Oil and Gas leasing program still has 2 Gulf of Mexico lease sales remaining (259 and 261). Remember, the BOEM lease sale 257 is not off the table should there be an appeal. But I am not entirely convinced the DOI’s Debra Haaland would pull together a well-founded appeal. For me, it is not over until the state of Louisiana and the API sing.
WTI $87.36/bbl - March Contract, 09:04 am CDT 2/1/2022: https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 1/31/2022 Close
Crude Oil ($/barrel) Percent Change
WTI 89.16 +1.7
Brent 92.35 +1.0
Louisiana Light 91.31 +1.
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
US Oil and Gas Rig Count up 6 reflecting 610 rigs as of 1/28/2022. GOM Offshore Rig Count remained unchanged from the previous week and is currently showing 18 rigs. Gulfslope’s Tau prospect is located in GOM Louisiana Offshore waters.
https://rigcount.bakerhughes.com
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/WeeklyRigCountUpdate.pdf
WTI $87.28/bbl - March Contract, 07:19 am CDT 1/31/2022: https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 1/28/2022 Close
Crude Oil ($/barrel) Percent Change
WTI 87.67 +0.1
Brent 91.47 +0.8
Louisiana Light 90.07 +0.
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
Demand and crude oil prices for 2022 will continue to be strong in my opinion. The global oil market is tight but eventually will rebalance. The question is when? OPEC did underproduced in December falling short of its 400,000 barrel per day target by almost 150,000.
‘JP Morgan sees OPEC spare capacity falling through 2022’
https://www.reuters.com/business/jp-morgan-sees-opec-spare-capacity-falling-through-2022-2022-01-12/
Excerpt:
“Jan 12 (Reuters) - JP Morgan on Wednesday said it expects Organization of Petroleum Exporting Countries' spare capacity to fall through 2022, driving a higher risk premium to oil prices.”
“Assuming production at prevailing quotas, OPEC spare capacity will fall to 4% of total production capacity by fourth quarter 2022, from 13% in the third quarter 2021, the U.S. investment bank said in a note.”
Mrs. Smith
Crude oil demand and prices have outperformed analysis expectations. We witnessed a +50% increase in crude pricing this past year with crude hitting a 7 year high already in 2022.
The EIA increased the 2022 average crude oil price for WTI and Brent by 7% on their most recent monthly forecast (1/22 STEO).
Data reflects industry financials improving with estimated cash flows to be in the green, and capital expenditures continuing to rise in 2022 and 2023.
There are reports of an “uptick in exploration data licensing for the U.S. Gulf of Mexico and Permian Basin.”
With global inventories on the decline, demand and crude pricing forging ahead beyond many analysis forecasts, are we already in a crude oil supercycle?
Considering historical decline rates in producing oil and gas assets, significant additional supplies will be needed, and these come from locating new fields in super basins. Is Tau one of those fields?
Also, I suspect the perfect storm of these influences to make Gulfslope and others more likely to be drilling in the GOM sooner rather than later.
WTI $86.89/bbl - February Contract, 08:46 am CDT 1/26/2022: https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 1/25/2022 Close
Crude Oil ($/barrel) Percent Change
WTI 86.61 +2.5
Brent 89.49 +2.0
Louisiana Light 89.29 +3.
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
U.S. fossil fuel production to reach new highs in 2023, said the EIA - Released January 21, 2022
https://www.eia.gov/todayinenergy/detail.php?id=50978
After declining in 2020, the combined production of U.S. fossil fuels (including natural gas, crude oil, and coal) increased by 2% in 2021 to 77.14 quadrillion British thermal units. Based on forecasts in our latest Short-Term Energy Outlook (STEO), we expect U.S. fossil fuel production to continue rising in both 2022 and 2023, surpassing production in 2019, to reach a new record in 2023.
Of the total U.S. fossil fuel production in 2021, dry natural gas accounted for 46%, the largest share. Crude oil accounted for 30%, coal for 15%, and natural gas plant liquids (NGPLs) for 9%. We expect those shares to remain similar through 2023.
U.S. crude oil production dropped slightly, by an estimated 1%, in 2021, but we expect it to increase by 6% in 2022 and 5% in 2023. We forecast that, in 2022 and 2023, crude oil prices will remain high enough to encourage growth in the number of active drilling rigs and continued improvement in drilling efficiency.
U.S. dry natural gas production increased by 2% in 2021, based on monthly data through October and estimates for November and December. In our forecast, improvements in drilling efficiency and new-well production will contribute to production increases of 3% in 2022 and 2% in 2023.
U.S. coal production increased by an estimated 7% in 2021, driven by increased demand for coal because of rising natural gas prices. Coal's comparatively lower prices made coal more economical for use in electric power generation compared with natural gas. In 2020, U.S. coal production had fallen to its lowest level since 1964. We forecast that coal production will increase 6% in 2022 as coal-fired electricity generators rebuild inventory levels. However, we forecast that coal production will only increase by 1% in 2023 as demand for coal in the electric power sector declines.
U.S. NGPL production increased by 4% in 2021. We expect U.S. NGPL production to increase by 9% in 2022 and then by 4% in 2023. Because NGPLs are a coproduct of natural gas, our forecast for rising NGPL production is linked to our forecast for rising natural gas production.
API Monthly Statistical Report ‘MSR’, Released 1/21/2022. API Statistics Department & Office of the Chief Economist
For Notable Chart Details and Data By Section see ‘MSR’ pdf link: https://www.api.org/-/media/Files/News/2022/01/API-Monthly-Statistical-Report-Dec-2021.pdf
Petroleum Facts at a Glance: https://www.api.org/-/media/Files/News/2022/01/Petroleum-Facts-at-a-Glance-December-2021.pdf
EXECUTIVE SUMMARY
U.S. petroleum demand of 21.1 million barrels per day (mb/d) in December ended 2021 strongly despite the pandemic – and likely in part due to it. There appeared to be more driving in lieu of flying. Supply chains needed more fuel for freight trucking and marine shipping. And the other oils – that is, intermediate products in refining and petrochemicals – which enable the manufacturing of medical plastics and sterile packaging rose in December to their highest level on record since 1965.
By contrast, U.S crude oil and natural gas liquids production remained flat overall. U.S. crude oil inventories fell below their five-year range, and crude oil imports rose by 0.5 million barrels per day (mb/d) in December compared with a year ago. Consequently, the U.S. was a petroleum net importer in December and for 2021 overall. With the U.S. taking net barrels from global markets instead of contributing to them, oil, and therefore petroleum fuel prices, remained among their highest since 2014, despite a decrease with uncertainty over the Omicron variant in late December.
Refining activity rose for the month, but its throughput and capacity utilization rates were the second lowest for December in a decade or more. Meanwhile, U.S. refined product exports fell by 0.6 mb/d y/y in December to their lowest since 2015, despite global liquid fuels’ demand that eclipsed 101 mb/d per the U.S. Energy Information Administration (EIA), exceeding its level from Dec. 2019. The lower U.S. refining activity and product exports also likely reflect the challenges to domestic crude oil production, which reduced the historic abundance and discount of U.S. crude oil versus global prices as the U.S. reverted to being a petroleum net importer – and is expected by EIA to be even more of one in 2022.
Leading economic indicators were mixed. API’s Distillate Economic IndicatorTM suggested continued growth of U.S. industrial production and broader economic activity (please see link above for chart details), but consumer angst and therefore spending uncertainty rose per the University of Michigan’s consumer sentiment index.
Demand
• Strongest U.S. petroleum for the month of December since 2005.
– Motor gasoline demand in December was 1.0% above that of Dec. 2019.
– Strongest December distillate demand since 2014 driven by trucking.
– Omicron hit December air travel and jet fuel demand.
– Strongest December residual fuel oil demand since 2011 due to marine shipping.
– Other oils’ demand highest on record since 1965.
Prices & Macroeconomy
• A December reprieve for crude oil and gasoline prices.
• Leading indicators suggest industrial growth, but weaker consumer spending.
Supply
• U.S. crude oil edged up, but was largely offset by lower NGL production between November and December.
International trade
• U.S. petroleum net imports for Dec. and 2021; projected by EIA to persist in 2022.
Industry operations
• Refinery inputs and capacity utilization picked up in December but remained historically low.
Inventories
• Crude oil inventories fell below the 5-year range; key refined product inventories historically low.
US Oil and Gas Rig Count up 3 reflecting 604 rigs as of 1/21/2022. GOM Offshore Rig Count remained unchanged from the previous week and is currently showing 18 rigs. Gulfslope’s Tau prospect is located in GOM Louisiana Offshore waters.
https://rigcount.bakerhughes.com
https://rigcount.bakerhughes.com/static-files/b1381138-cf48-4c9f-ba0f-a2cd117bf5e8
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/WeeklyRigCountUpdate.pdf
WTI $84.95/bbl - February Contract, 12:56 pm CDT 1/21/2022: https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 1/20/2022 Close
Crude Oil ($/barrel) Percent Change
WTI 86.29 -0.6
Brent 89.75 +0.1
Louisiana Light 88.39 -0.
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
Oil inventories increased by 0.5 million barrels - EIA Weekly Petroleum Status Report, Release Date: 1/20/2022
Full Report with Graphs: https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
WTI $86.90/bbl February Contract, 20:15 pm CDT 20/01/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
Summary of Weekly Petroleum Data for the week ending January 14, 2022
HIGHLIGHTS:
U.S. crude oil refinery inputs averaged 15.5 million barrels per day during the week ending January 14, 2022 which was 120,000 barrels per day less than the previous week’s average. Refineries operated at 88.1% of their operable capacity last week. Gasoline production increased last week, averaging 8.7 million barrels per day. Distillate fuel production decreased last week, averaging 4.7 million barrels per day.
U.S. crude oil imports averaged 6.7 million barrels per day last week, increased by 0.7 million barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.4 million barrels per day, 10.8% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 391,000 barrels per day, and distillate fuel imports averaged 306,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 0.5 million barrels from the previous week. At 413.8 million barrels, U.S. crude oil inventories are about 8% below the five year average for this time of year. Total motor gasoline inventories increased by 5.9 million barrels last week and are about 2% below the five year average for this time of year. Finished gasoline and blending components inventories both increased last week. Distillate fuel inventories decreased by 1.4 million barrels last week and are about 16% below the five year average for this time of year. Propane/propylene inventories decreased by 3.7 million barrels last week and are about 7% below the five year average for this time of year. Total commercial petroleum inventories decreased by 1.5 million barrels last week.
Total products supplied over the last four-week period averaged 21.2 million barrels a day, up by 11.9% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.5 million barrels a day, up by 9.0% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels a day over the past four weeks, up by 15.3% from the same period last year. Jet fuel product supplied was up 31.8% compared with the same four-week period last year.
The West Texas Intermediate crude oil price was $83.82 per barrel on January 14, 2022, $4.82 above last week’s price and $31.57 more than a year ago. The spot price for conventional gasoline in the New York Harbor was $2.473 per gallon, $0.127 more than last week’s price and $0.912 above a year ago. The spot price for No. 2 heating oil in the New York Harbor was $2.513 per gallon, $0.139 above last week’s price and $1.020 over a year ago.
The national average retail regular gasoline price increased to $3.306 per gallon on January 17, 2022, $0.011 above last week’s price and $0.927 over a year ago. The national average retail diesel fuel price increased to $3.725 per gallon, $0.068 per gallon more than last week’s price and $1.029 higher than a year ago.
Texas LNG - Slideshow: ‘Poised to Meet the World's Energy & Climate Need’
Slideshow: https://d3n8a8pro7vhmx.cloudfront.net/northtexansfornaturalgas/pages/3550/attachments/original/1640092920/Texas_LNG_Poised_To_Meet_World_Needs_Dec_2021.pdf?1640092920
EXECUTIVE SUMMARY
An abundance of natural gas – made possible by the Shale Revolution that began in Texas’ Barnett Shale nearly two decades ago – has enabled the United States to become one of the world’s largest exporters of the resource in only a few short years. Global demand for natural gas continues to grow as the world seeks to increase energy access and reduce emissions, and the bottom line is that Texas is poised to help meet the world’s energy needs.
The United States is currently the third largest exporter of liquefied natural gas and is forecast to surpass Qatar and Australia to become the top exporter by 2023. The growth of LNG has occurred as the international market for natural gas has grown, giving rise to the use of natural gas in its liquefied form for efficient transportation.
Since Texans For Natural Gas’ last report on the proposed build-out of LNG export facilities in Texas, both U.S. and global markets have transformed significantly.
U.S. LNG exports went from zero in 2016 to 10 billion cubic feet per day (Bcf/d) delivered to 38 countries, with exports reaching a new high in late 2020. Two of the seven facilities proposed for Texas’ Gulf Coast in 2018 are now operational, delivering economic benefits within the state and supplying affordable, reliable, clean energy to the world.
The United States currently has seven operational LNG export facilities with a takeaway capacity of 11.66 Bcf/d of natural gas. Nearly all the LNG exported by the United States (88 percent) comes from four Gulf Coast facilities located in Texas and Louisiana. The two Texas facilities represent nearly 37 percent of current U.S. LNG export capacity, and Texas will be home to more than 25 percent of the additional capacity that is currently being built or has been proposed.
Global natural gas demand has risen in recent years and is expected to continue to grow well into the future as countries look to reduce emissions and bring energy access to developing nations. Natural gas has more than 50 percent lower carbon dioxide emissions than coal, which makes it a clean power source on its own and reliable back-up for increased renewable generation. The switch from coal to natural gas for power generation in the United States has cut greenhouse gas emissions in half, and natural gas transported as LNG is seen as a way for large economies like China and India to similarly reduce their emissions.
Asia overtook Europe to become the largest importer of U.S. LNG in 2020, with the region receiving 46 percent of U.S. LNG exports and Europe receiving 37 percent in 2021. Countries like France and the U.K. are looking to build LNG import terminals, forecasting continued growth for the product in the region. As of now, Spain has Europe’s largest number of LNG import terminals while Rotterdam’s port in the Netherlands, known to be Europe’s largest, has an LNG storage capacity of 19 million cubic feet with plans for continued growth.
North America, led by the United States, is expected to contribute to 75 percent of total global LNG growth by 2024 with the development and expansion of new infrastructure. With most of the supply of natural gas coming out of the Gulf Coast and the bulk of the export facilities being built there, that means Texas will play an even more important role in supplying the energy that will help lower global emissions and reduce global energy poverty.
State of American Energy 2022 - Video -
Federal Reserve Bank of Dallas ”Energy Slideshow”, Updated January 11, 2022.
See link for slideshow charts on Energy Prices, Global Petroleum Data, National Outlook Data, and Regional Activity: https://www.dallasfed.org/-/media/Documents/research/energy/energycharts.pdf?la=en
“U.S.” Economic Activity Charts, Issued January 18, 2022 Federal Reserve Bank of Dallas: https://www.dallasfed.org/-/media/Documents/research/econdata/uscharts.pdf
Database of ”Global” Economic Indicators (Real, Price, Trade and Financial), Charts as of January 2022: https://www.dallasfed.org/institute/dgei
Mrs. Smith
January 2022 OPEC Monthly Oil Market Report “MOMR”, Released 1/18/2022
WTI $85.08/bbl up 1.50% February Contract, 11:16 am CDT 18/01/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
1/2022 MOMR PDF: https://momr.opec.org/pdf-download/res/pdf_delivery_momr.php?secToken2=accept
1/2022 MOMR VIDEO: https://players.brightcove.net/34306109001/default_default/index.html?videoId=6292251473001
OPEC Oil Market Highlights
Crude Oil Price Movements
Both crude oil spot and futures prices fell for the second-consecutive month in December. Major physical crude benchmarks decreased about 9%, m-o-m, on growing concerns that the rapid spread of the Omicron COVID-19 variant may have an impact on the global economy and oil demand. The OPEC Reference Basket fell $5.99, or 7.5%, to settle at a three-month low of $74.38/b. Crude oil futures prices extended losses in December, declining on both sides of the Atlantic, with the ICE Brent front month down $6.05, or 7.5%, to average $74.80/b and NYMEX WTI declining by $6.96, or 8.8%, to average $71.69/b. Consequently, the Brent/WTI futures spread widened 91¢ to average $3.11/b. The market structure of all three crude benchmarks – ICE Brent, NYMEX WTI and DME Oman – weakened in December, m-o-m. Hedge funds and other money managers extended sharp sell-offs in the first half of December, cutting combined futures and options net long positions related to ICE Brent and NYMEX WTI by about 30% between early November and mid-December.
World Economy
The global GDP growth forecasts for 2021 and 2022 remain unchanged at 5.5% and 4.2%, respectively. The US is estimated to grow by 5.5% in 2021, while growth for 2022 is slightly lowered to 4%. Euro-zone economic growth for 2021 is revised up to 5.2%, while growth for 2022 remains unchanged at 3.9%. Japan’s economic growth forecast for 2021 is revised down to 1.8%, while growth for 2022 remains unchanged at 2.2%. Growth forecasts in emerging economies remain largely unchanged, with China’s forecast at 8% for 2021 and 5.6% for 2022. India’s forecast for 2021 stands at 8.8%, and is forecast at 7% in 2022. Russia’s GDP growth forecast remains unchanged at 4% for 2021 and 2.7% for 2022. Brazil’s economic growth forecast for 2021 is unchanged at 4.7%, while growth for 2022 was revised down to 1.5%. The spread of COVID-19 variants and the effectiveness of vaccines, as well as the pace of vaccine rollouts worldwide, remain key uncertainties. Moreover, supply chain bottlenecks and sovereign debt levels in many regions, together with rising inflationary pressures and the responses of central banks, remain key factors that require close monitoring.
World Oil Demand
World oil demand growth in 2021 is unchanged from last month’s assessment at 5.7 mb/d to average 96.6 mb/d. An upward revision in 4Q21, amid better-than-anticipated transportation fuel consumption in the OECD, was offset by a downward revision in 3Q21 given the latest actual data. Oil demand growth in the OECD is estimated to have averaged 2.5 mb/d and, in the non-OECD region, oil demand growth is estimated at 3.1 mb/d for the year. In 2022, the forecast for world oil demand growth also remains unchanged at 4.2 mb/d, with total global consumption at 100.8 mb/d. In the OECD, oil demand is forecast to grow by 1.8 mb/d, while in the non-OECD oil demand is projected to increase by 2.3 mb/d. While the impact of the Omicron variant is projected to be mild and short-lived, uncertainties remain regarding new variants and renewed mobility restrictions, amid an otherwise steady global economic recovery.
World Oil Supply
Non-OPEC liquids supply growth in 2021 remains unchanged at around 0.7 mb/d, y-o-y, to average 63.6 mb/d. Upward revisions in the US and Kazakhstan were offset by downward adjustments to Brazil, Canada, Ecuador and Norway. The 2021 oil supply estimate primarily sees growth in Canada, Russia, China, the US, Guyana, Norway, Argentina and Qatar, while output is expected to have declined in the UK, Brazil, Colombia and Indonesia. Similarly, the non-OPEC supply growth forecast for 2022 is also unchanged at around 3.0 mb/d, to average 66.7 mb/d. The main drivers of liquids supply growth are expected to be the US and Russia, followed by Brazil, Canada, Kazakhstan, Norway and Guyana. OPEC NGLs are forecast to grow by 0.1 mb/d both in 2021 and 2022 to average 5.1 mb/d and 5.3 mb/d, respectively. In December, OPEC crude oil production increased by 0.2 mb/d m-o-m, to average 27.9 mb/d, according to available secondary sources.
Product Markets and Refining Operations
Refinery margins in all main trading hubs rebounded in December from the downturn seen in the previous month. Margins reached their second highest levels since May 2020 and inched closer to the record highs seen in October 2021. An increasingly tighter product balance in all regions and a pick-up in fuel consumption levels, amid the end-of-the-year holidays, combined to provide positive stimulus to product markets and ultimately led to a robust performance by jet fuel, kerosene and fuel oil, despite a significant rise in global product output levels and rising COVID-19 cases. In addition, strong heating fuel demand, as well as prevailing high gas prices, particularly in Europe, lent further backing to middle distillate markets. In contrast, temporary lockdowns in December exacerbated the seasonal gasoline weakness in the Atlantic Basin, thus limiting further gains in refining economics.
Tanker Market
The long-expected year-end recovery in dirty tanker spot freight rates failed to materialize in December, as lockdowns at the end of the year and softer Chinese buying limited tonnage demand. On average, VLCCs and Aframax slipped 5% and 3%, respectively, m-o-m in December. Suezmax managed a 7% gain over the month before, but remained well below pre-COVID-19 levels. For the year 2021, average VLCC and Suezmax spot freight rates witnessed their worst performance going back more than a decade. Clean rates enjoyed a better performance in December, particularly West of Suez, supported by demand on the Mediterranean routes.
Crude and Refined Products Trade
Preliminary data shows US crude imports edged lower in the final month of the year, but managed to end 4% higher, y-o-y, in 2021, averaging 6.1 mb/d. US crude exports remained below 3.0 mb/d in December and averaged 2.9 mb/d in 2021, representing a 9% decline. The latest data for China shows the country’s crude imports recovered from the low level seen in October to average 10.2 mb/d in November, as state-owned refiners returned to the market. Preliminary data for December shows crude imports increasing further to 10.9 mb/d in the final month of the year. This would result in China’s crude imports in 2021 averaging 10.3 mb/d, down around 5% from the inflated levels seen in 2020 when Chinese buyers snapped up excess volumes in the market. In India, crude imports jumped to a 10-month high in November to average 4.5 mb/d as refiners sought to replenish inventories in preparation for higher runs in 1Q22, following holidays in October and early November. Product exports from India remained steady, averaging 1.3 mb/d in November, as diesel outflows remained strong and jet fuel exports increased, reflecting tightness in the Asian market due to constrained exports from China. Japan’s crude imports jumped in November to the highest since March 2020, averaging 2.8 mb/d, amid higher refinery runs to meet winter heating demand. The latest data shows crude imports into OECD Europe slipped in September, although tanker tracking data shows inflows picking up through November and then easing in December amid lockdown measures.
Commercial Stock Movements
Preliminary November data sees total OECD commercial oil stocks down by 16.0 mb, m-o-m. At 2,721 mb, OECD commercial oil stocks were 389 mb lower than the same period in 2020, 247 mb lower than the latest five-year average, and 221 mb below the 2015-2019 average. Within the components, crude and products stocks fell, m-o-m, by 12.7 mb and 3.3 mb, respectively. At 1,317 mb, crude stocks in the OECD were 143 mb less than the latest five-year average and 137 mb below the 2015-2019 average. OECD product stocks stood at 1,405 mb, representing a deficit of 104 mb compared with the latest five-year average and 84 mb below the 2015-2019 average. In terms of days of forward cover, OECD commercial stocks fell, m-o-m, in November by 0.2 day to stand at 60.7 days. This is 13.2 days below November 2020 levels, 3.6 days less than the latest five-year average and 1.5 days lower than the 2015-2019 average.
Balance of Supply and Demand
Demand for OPEC crude in 2021 remains unchanged from the previous month to stand at 27.8 mb/d, around 4.9 mb/d higher than in 2020. Demand for OPEC crude in 2022 also remains unchanged from the previous month to stand at 28.9 mb/d, around 1.0 mb/d higher than in 2021.
OPEC FEATURED ARTICLE - ‘Monetary policies and their impact on the oil market’, Released January 18, 2022
OECD Composite Leading Indicators News Release, Paris, 13 January 2022:https://www.oecd.org/sdd/leading-indicators/composite-leading-indicators-cli-oecd-01-2022.pdf
In 2021, the world economy rebounded considerably from the outbreak of COVID-19 pandemic in 2020. However, the pandemic continued to be a major challenge throughout 2021, particularly with the emergence of new variants such as Delta in 2Q21 and Omicron in 4Q21. At the same time, major central banks, including the US Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England (BoE) and the Bank of Japan (BoJ), carried over their respective efforts of extraordinary quantitative easing (QE) programmes into 2021. In parallel, the global oil market continued its impressive recovery in 2021, driven by strong global oil demand, given worldwide lockdowns gradually easing and mobility increasing, and supported by the relentless efforts of the Declaration of Cooperation (DoC), which continued to rebalance oil markets.
The massive monetary stimulus programmes launched by the major central banks led their balance sheets to expand significantly in 2020 and 2021 (Graph 1). However, these QE efforts, in combination with strong underlying global demand and supply-chain bottlenecks, have resulted in higher inflation levels, which are now persisting in major economies. To curtail the potentially long- lasting impact of inflation, the major central banks have announced that they would adjust their QE programmes and consider reducing their very accommodative monetary policies.
Meanwhile, higher inflation levels have impacted economies to varying degrees. In developed, economies, US inflation has picked up strongly. In the emerging economies, particularly Russia and Brazil, inflation has been significant and led to rate hikes. In key Asian economies, including China and Japan, inflation has remained relatively low.
In the US, the Fed announced a faster tapering of already ongoing reductions in QE measures and is likely to raise key policy rates in 2022 multiple times. On the other hand, the ECB announced that it would only gradually start reducing its QE measures in March 2022 and does not plan to hike interest rates before 2023. The BoE is pursuing the fastest path, having already announced a rate increase in its December meeting, front-running the other major central banks, while ending QE measures in 2021. The BoJ, with the relatively largest monetary stimulus and an extensive history of QE policies, has announced a reduction in pandemic-related QE, but will continue with general ultra-loose monetary policy and non-pandemic-related QE.
Higher interest rates, compounded by the ongoing US economic growth recovery, will most likely appreciate the value of the US dollar relative to other currencies. This may have a few implications on the oil market. Historically, a strong dollar would cause non-US-dollar denominated net-importing economies to require more of their local currency to import crude oil. However, in the past, a gradually strengthening US dollar had a limiting effect on oil price. Moreover, significant key US interest rate hikes are expected for 2Q22, which coincides with the run-up to northern hemisphere’s driving season. Therefore, any demand decrease in the oil market as a result of tighter monetary policies will likely be offset by an increase in demand associated with the driving season at a time of slowing of COVID-19 infections in the northern hemisphere should support an acceleration in oil demand.
In summary, monetary actions are not expected to hinder underlying global economic growth momentum, but rather serve to recalibrate otherwise overheating economies. With an ongoing robust oil demand forecast, and the continuing efforts of OPEC Member Countries and non-OPEC countries participating in the DoC, the oil market is expected to remain well-supported throughout 2022.
Oil prices jump to multi-year high amid rising supply concerns
Some OPEC member countries are facing difficulties in meeting the allowed capacities due to underinvestment and outages.
https://www.offshore-technology.com/news/oil-prices-rising-supply-concerns/
Oil benchmarks have hit their highest price levels in seven years after tensions in the Middle-East renewed supply concerns.
Brent crude futures went up by $1.02, or 1.2%, to reach $87.50 a barrel, while the price of US West Texas Intermediate (WTI) crude futures increased by $1.36, or 1.6%, to trade at $85.18 a barrel, according to Reuters.
The two benchmarks have hit their highest price levels since October 2014.
An ANZ Research analyst was cited by the news agency as saying in a note: “The new geopolitical tension added to ongoing signs of tightness across the market.”
Yemen’s Houthi group recently launched a fresh assault on the UAE, escalating hostilities in the region. The attack set off explosions in fuel trucks in Mussafah, killing three people.
Despite the disruptions, UAE oil firm ADNOC said it would still provide an uninterrupted product supply to its customers, including international buyers.
Reuters added that some Organisation of the Petroleum Exporting Countries (OPEC) member countries are facing difficulties in meeting the allowed capacities due to underinvestment and outages.
The producers, as per the agreement with OPEC and other allied nations, are entailed to increase production by 400,000 barrels per day per month.
PVM analyst Tamas Varga was cited by the news agency as saying: “The consensus is that the situation will not improve in the foreseeable future and oil demand growth, together with supply constraints, is inevitably leading to a tighter oil balance.”
According to Goldman Sachs analysts, oil inventories in the Organisation for Economic Co-operation and Development (OECD) countries would drop to their lowest since 2000 by the summer of 2022.
Brent oil prices are also anticipated to reach $100 later this year.
Earlier this month, it was revealed that the US has the largest share in the global oil and gas transmission pipeline network.
Russia missing OPEC targets as some members struggle to keep pace, by Dina Khrennikova and Olga Tanas 1/18/2022
https://worldoil.com/news/2022/1/18/russia-missing-opec-targets-as-some-members-struggle-to-keep-pace/
MOSCOW (Bloomberg) --Russia may be able to deliver only about half of its scheduled increases in crude production over the next six months, joining the ranks of OPEC+ nations that are struggling to ramp up even as fuel demand rebounds from the pandemic.
With crude already trading above $85 a barrel in London, the outlook for Russian output leaves the global market looking even tighter than expected. It risks amplifying the energy-price surge that’s contributing to the highest inflation in decades.
In the booming Asian physical market, Russian premium ESPO crude -- a favorite grade among Chinese processors -- has already surged to the highest since November amid declining inventories in China, according to traders.
The OPEC+ member is supposed to be adding 100,000 barrels a day of crude to the market each month, but growth ground to a halt in December. Due to a decline in drilling last year, most analysts polled by Bloomberg News expect Russia’s actual monthly increases can go no higher than 60,000 barrels a day in the first half of 2022.
“We have a hard time seeing Russian suppliers maintaining 100,000 barrels-a-day production increases each month for the next six months,” Bank of America Corp. analysts Karen Kostanyan and Ekaterina Smyk told Bloomberg.
Baby Steps
The Organization of Petroleum Exporting Countries and its allies are in the process of restoring output halted during the pandemic. The coalition is supposed to pump an additional 400,000 barrels a day each month, yet the actual production increases have fallen short due to factors ranging from internal unrest to insufficient long-term investment in a number of countries.
Last month, OPEC boosted output by just 90,000 barrels a day. Russia’s production started stagnating in November, and in December it dropped below its OPEC+ quota for crude, according to Bloomberg estimates based on Energy Ministry statistics. The first days of January brought a less than 1% rise in the country’s total petroleum output, which includes crude and a light oil called condensate that is extracted from natural gas, according to Interfax.
Russia’s top oil official, Deputy Prime Minister Alexander Novak, has said the country will continue to hit its production targets. Output of crude will rise to 10.1 million barrels a day this month, he told the Tass news agency last week. That would be in line with its OPEC+ quota and an increase of about 100,000 barrels a day from December.
Inflationary Pressure
If OPEC+ continues to struggle to hit its production targets, there may be wider economic consequences. The recovery in oil demand has remained robust as the Omicron strain of the coronavirus has a milder effect on the global economy than anticipated.
Brent crude, the international benchmark, has jumped more than 10% since the start of the year and may have further to go, according to Vitol Group. High energy prices are a significant contributor to rising inflation and the White House has consistently applied pressure on OPEC+ to boost supply and help curb fuel costs.
Through most of 2021, Russia maintained fairly consistent monthly production increases as it restored capacity idled in the early stages of the Covid-19 pandemic. By November, the revival started to run out of steam.
The spread of active, idle and shut-down Russian production wells returned to pre-pandemic levels, indicating that the industry had nearly fully deployed its spare capacity. That was later confirmed by statements from the country’s largest producers, Rosneft PJSC, Lukoil PJSC and Gazprom Neft PJSC.
Back on Track
Last year, Russian oil majors were in no hurry to boost their production drilling, a move that would have enabled new capacity to be brought onstream in late 2021 and in 2022. By the end of November, overall drilling rates for the year were down 4.5% compared to the same period in 2020, according to Interfax data based on the Energy Ministry’s
CDU-TEK figures.
The Russian oil industry has been in wait-and-see mode due to the uncertainty around the effect of the coronavirus on demand, according to analysts from Bank of America and Vygon Consulting. Several companies also capped production last year after some of their projects lost tax breaks.
These producers “are rather unwilling to invest” in those projects until they find out whether the Finance Ministry will bring some of those incentives back, said Daria Melnik, a senior analyst at Oslo-based consultant Rystad Energy A/S. The government is ready to consider some tax breaks from 2023 at the earliest, provided that the OPEC+ output cuts end this year as planned, Deputy Finance Minister Alexey Sazanov told Bloomberg last month.
Digging and Rigging
This year, most major Russian producers plan to increase capital expenditure, varying from a boost of around 10% at Gazprom Neft to some 20% at Rosneft. Tatneft PJSC expects its 2022 upstream investments to grow as much as three to four times compared with last year.
This increase in drilling will eventually deliver higher output, but most of the gains will come after 2022. The new wells will generate only a modest increase this year, according to analysts from Rystad Energy to Renaissance Capital.
Rosneft, which accounts for a significant part of total spending in the Russian oil industry, “is now channeling money into its Vostok Oil project, it’s the producer’s main priority,” said Melnik. The company plans to start large-scale crude production at the Arctic project in 2024.
Gazprom Neft’s Zima cluster of new fields in Western Siberia, which analysts from Renaissance Capital and Rystad Energy name as a source of new crude for the producer in 2022, will reach peak output in 2024. Its Arctic oil-rims project is already producing, but will ramp up gradually, doubling over five years.
This explains why most observers see Russia falling short of its targets in 2021. “We don’t expect Russia to raise its output by 100,000 barrels per day on any month this year,” said Melnik.
Global oil and gas investments to surge to $628bn in 2022, Rystad says
https://www.thenationalnews.com/business/energy/2022/01/12/global-oil-and-gas-investments-to-surge-to-628bn-in-2022-rystad-says/
Upstream gas and LNG investments will jump 14% annually this year, according to the Norway-based energy research company.
Global oil and gas investments will increase more than 4.3 percent annually to reach $628 billion this year as the industry recovers from the pandemic and from the hurdles posed by the Omicron variant, according to a report by consultancy Rystad Energy.
The increase in investment will largely be driven by a 14 percent year-on-year rise in upstream gas and liquefied natural gas investments in 2022, the independent energy research and data analytics company said.
Upstream gas and liquefied natural gas will be the fastest-growing segment this year, with investments rising to nearly $149bn, from $131bn in 2021. This falls short of the pre-pandemic total but investment in the sector is expected to surpass the 2019 levels of $168bn in two years, reaching $171bn in 2024, Rystad said.
Upstream oil investments are projected to rise 7 percent yearly to $307bn in 2022. However, the midstream and downstream investments will fall 6.7 percent on annual basis to $172bn this year.
The pervasive spread of the Omicron variant will inevitably lead to restrictions on movement in the first quarter of 2022, capping energy demand and recovery in the major crude-consuming sectors of road transport and aviation, Rystad Energy’s head of energy service research, Audun Martinsen, said.
“But despite the ongoing disruptions caused by [the] Covid-19, the outlook for the global oil and gas market is promising,” he said.
Global shale investments are predicted to surge 18 per cent to reach $102bn this year, almost $16bn more than last year, Rystad said.
The offshore investments are set to reach $155bn, up 7 percent annually, while conventional onshore will jump 8 per cent to $290bn this year, it said.
This year’s investment growth is very much “pre-programmed” by the $150bn worth of greenfield projects sanctioned last year, up from $80bn in 2020, Rystad said.
Approving activity in 2022 is likely to mirror last year’s levels, with a similar amount of project spending to be unleashed in the short to medium term, it said.
Global oil demand is expected to plateau by the mid-2030s. Crude is expected to remain the biggest component of the international energy mix until 2045, as the world’s population increases and the global economy more than doubles in size to $270 trillion, Opec said in its World Oil Outlook 2021 report in September.
Demand is forecast to rise by 17.6 million barrels per day in two and a half decades, growing to 108.2 million bpd in 2045 from 90.6 million bpd in 2020, according to Opec.
Regionally, Australia and the Middle East stand out in terms of investments, Rystad’s report showed.
Investments in Australia are expected to rise 33 percent owing to the greenfield gas developments. In the Middle East, investments will rise 22 per cent this year as Saudi Arabia boosts its oil export capacity and Qatar expands production and LNG export capacity, Rystad said.
The consultancy, though, pointed out that an “outstanding concern” in 2022 is execution challenges related to the pandemic and increased inflationary costs for steel and other input factors.
“These are likely to make operators mildly cautious regarding significant capital commitments … major offshore operators are being challenged on their portfolio strategy as the energy transition unfolds, with many exploration and production companies already directing investment budgets to low-carbon energy sources.”
For offshore contractors, the energy transition could be advantageous for wind power developments.
Spending in the offshore wind sector reached almost $50bn last year, double the 2019 levels. By 2025, Rystad expects offshore wind investments will rise to $70bn as demand for clean energy surges.
By contrast, the offshore oil and gas sector is set to face a challenging energy transition period. Oil demand is likely to peak in the next five years, capping offshore investment at about $180bn in 2025.
Enverus: US upstream M&A rose 25% y/y in 2021, Published by Nicholas Woodroof, Deputy Editor
Oilfield Technology, Thursday, 13 January 2022 17:00
https://www.oilfieldtechnology.com/special-reports/13012022/enverus-us-upstream-ma-rose-25-yy-in-2021/
Enverus has released its summary of 4Q21 and full-year 2021 US upstream M&A.
In the second year of a COVID-influenced market, M&A rose 25% year-over-year to reach US$66 billion. However, activity was uneven with a slow beginning and end to 2021, including US$9 billion transacted in 4Q21. That kept the yearly total below the US$72 billion average from 2015-2019.
“Since the emergence of COVID, upstream M&A has been characterized by fewer, but larger, deals,” said Andrew Dittmar, director at Enverus. “During 2020 that took the form of public companies consolidating amongst themselves and in 2021 transitioned to a focus on rolling up private E&Ps. But the volume of deals remained depressed with 172 and 179 transactions in 2020 and 2021, respectively, versus an average of nearly 400 deals per year before COVID.”
Private equity exits continued into the fourth quarter, with two of the top three deals of 4Q21 involving the sale of a PE-backed E&P to a public company. In the Haynesville, Southwestern Energy purchased GEP Haynesville, substantially expanding the initial Haynesville position it acquired earlier in the year via its buy of Indigo Natural Resources. On the oil side of the business, Earthstone Energy capped a run of recent purchases by acquiring Chisholm Energy in the Delaware Basin. The Delaware and Haynesville were the two most active plays of 4Q21 and combined to account for 80% of the quarter’s deal value.
“Buyers have been largely focused on adding high-quality inventory to build out their runway and sustain the strong cash flow generation recently achieved,” added Dittmar. “The largest supply of inventory meeting buyers’ criteria is available for sale in the Delaware for oil and the Haynesville for gas. That is largely because both these plays had significant private investment in prior years that the sponsors are now looking to monetize via sales to a public company.”
But buying a private or PE-backed E&P isn’t the only way to secure inventory in these basins. Continental Resources entered the Delaware Basin in 4Q21 by purchasing Pioneer Natural Resources’ position for US$3.25 billion. Pioneer had, in turn, picked up this asset when it merged with Parsley Energy during the height of the public company M&A boom in late 2020.
“Big time corporate M&A often leads to a subsequent wave of asset deals as buyers prune their expanded portfolios,” said Dittmar. “There was a bit of this during 2021 with non-core asset sales by Pioneer and Diamondback Energy, another buyer from the 2020 merger wave. There should still be plenty of room to run for deals though and we anticipate this to drive a resurgence in mid-size, asset-level deal making.”
While public companies did most of the buying 2021, private equity hasn’t left the upstream space and, in some cases, are reloading their portfolios. Bucking the trend of private-to-public deals in the Haynesville, Paloma Partners VI, an affiliate of PE-sponsor EnCap, took smaller sized public Haynesville producer Goodrich Petroleum private in a US$480 million deal during 2021’s fourth quarter. Other private equity-backed companies, like Colgate Energy and Ameredev II in the Permian, have used M&A to build scale towards a size that would allow them to test the waters for an IPO. That has been through both third-party M&A and combinations within their own sponsors’ portfolio of companies, sometimes termed a “smashco” deal within the industry.
“The IPO market has been substantively closed to traditional E&Ps for several years now, with just one notable offering since 2017 - Vine Energy which only lasted six months as a publicly traded company before exiting in mid-2021 via a sale to Chesapeake Energy. A couple companies now look likely to again test whether newfound investor enthusiasm for the space translates into a willingness to support IPOs. That should be one of the more interesting stories to follow in 2022,” concluded Dittmar.
Overall, the M&A market should be set for an active 2022. Pricing on inventory in areas like the Delaware Basin and Haynesville is still attractive for buyers and additional assets should be available on the market. There is also high-quality inventory remaining in other plays like the Midland Basin and northeast Marcellus dry gas, but the market has had fewer sellers in those areas. In other more mature regions like the Williston Basin (Bakken) and Eagle Ford, substantial high-production assets are likely to be placed on the market and may be available at attractive prices drawing a mix of public and private buyers. A return to higher asset-level deal flow would smooth the boom-or-bust cycle of M&A that has characterised the two years since the emergence of COVID. However, there may be fewer multi-billion deals to buy public or private companies as so many of those deals have already transacted and strong commodity prices lessen the pressure on smaller companies to sell.
Conti eyes transition opportunity for US Gulf
TechnipFMC senior vice president says traditional oil and gas basin can be a low-carbon leader, UPDATED January 14, 2022 0:02 GMT, By Jennifer Presley in Houston
https://www.upstreamonline.com/people/conti-eyes-transition-opportunity-for-us-gulf/2-1-1123640
Thierry Conti, senior vice president of subsea commercial and strategy for TechnipFMC, listened when opportunity knocked more than a decade ago, resulting in a wealth of experience he has since earned in different roles across the energy sector.
Excerpt: ‘Fantastic opportunity'
For the US Gulf of Mexico, leveraging its existing oil and gas infrastructure is the best way to support incremental increases in production with a low-carbon intensity, he says.
Additionally, the US Gulf represents a “fantastic opportunity” for carbon storage, offering proximity for industries along the coast a way to manage carbon dioxide emissions.
“We have a unique opportunity to use the Gulf’s geologic profile, with massive aquifers and depleted reservoirs to use in a way that captures, transports, and injects carbon dioxide,”
“What is needed are more incentives to go along with that. The 45Q [tax credit] is good, but it is not enough. We need to continue to advocate for a better system to incentivise the emitters to capture, transport and inject.”
Addressing the climate challenge will require more than renewable energy, and saying that fossil fuel will disappear is “not realistic”, Conti adds.
“We know oil and gas is part of the solution, just as carbon capture and injection, and renewable energies are part of the solution,” he says.
“We need all of that. The Gulf of Mexico offers a great opportunity for carbon capture and for offshore renewable energy, like wind. And I am convinced that there are other offshore renewable energies that we could deploy in the Gulf of Mexico, as well.”
Tackling the global climate challenge at a regional level can produce incremental advances in the technology needed to make the transition.
“But to progress and accelerate the transition, we will all need to work together. None of us can absorb the investment and development costs to make it happen. We need to do it together,” he says.
“The key point for me on this market is scale.
“We need to scale up. If you scale, then you make it viable. And then you bring a real solution to the climate challenge.
“We need to inject much more than what we are injecting today of CO2.
“The challenge is massive. But so too is the opportunity,” he adds.
Op-Ed: Texas’ top energy resolutions for 2022
The new year is shaping up to be an important time for the energy security of our state and nation, and while there are many important issues to face, here are my top five energy resolutions for 2022, By Wayne Christian
https://www.worldoil.com/magazine/2022/january-2022/features/op-ed-texas-top-energy-resolutions-for-2022/
#5 End Biden’s Build Back Better Agenda. President Biden and Congressional Democrats continue their relentless effort to pass a bill that spends trillions to appease climate catastrophists. This assault on the oil and gas industry is an environmentalist’s wish list from electric vehicle (EV) tax credits to a new tax on oil and gas production. This bill is on life support because it is so far left even some Democrats can’t support it. And rightfully so, as it is an attempt to tax and regulate the oil and gas industry out of existence and prop up unreliable wind and solar with more taxpayer subsidies. Green New Deal or Build Back Better? A devil by a different name that needs to end.
#4 Fight Federal Overreach. You can bet even if Biden and Democrats in Washington, D.C. don’t get what in Congress, they’ll have unelected bureaucrats do it. For example, look no further than to Biden’s Environmental Protection Agency (EPA). The EPA is creating new methane emissions requirements which will raise natural gas prices, establishing new fuel-milage requirements for cars (incentivizing EV production), and restoring the failed Obama-era “Waters of the U.S.” rule that violated private property rights. These continued anti -oil and -gas policies will kill jobs, stifle economic growth, and make America more reliant of foreign nations to provide reliable energy.
#3 Combat ESG Investing. Radical environmentalists aren’t only fighting their war on oil and gas with increased regulations, taxes, and international agreements. They are coming for capital investments and your retirement accounts using Environmental, Social and Governance (ESG) investing, the new “woke” way on Wall Street. ESG investing is a rising force that deprives legitimate companies with un-woke business models from necessary capital investment, essentially starving them financially. This growing threat could cause record bankruptcies in the U.S. energy sector, destroying millions of high-paying jobs and U.S. energy independence. All this to placate climate catastrophists while doing nothing to remove environmentally harmful energy produced by foreign, state-owned companies directed by tyrannical governments.
#2 Support Increased U.S. Oil and Gas Production. Under the Trump administration, the U.S. surpassed Saudi Arabia and Russia to become the top producer of oil and natural gas in the world. Fast-forward three years, COVID-19, ESG investing, and regulatory uncertainty from the federal government have stripped us of our hard-fought energy independence. By frequently attempting to weaken the U.S. oil and gas industry you are not reducing emissions, you are merely shipping them overseas while killing American jobs, increasing costs to American consumers, and harming our country’s national security. With the highest-in-a-generation level of inflation, Americans are seeing sky-rocking prices everywhere from the pump to the grocery store squeeze their wallets thin. The solution to our energy security isn’t other nations, it’s our God-given natural resources and world class workforce right here at home.
#1 Make Our Electric Grid More Reliable. Wind and solar energy failed us during Winter Storm Uri, but yet we are building more of it than ever. According to the U.S. Energy Information Administration, Texas’ planned additions as of December 2020 include 11.6 GW of solar, 8.4 GW of wind, 5 GW of gas, with no new nuclear or coal. We need to build more natural gas fired electric generation in Texas, but the problem is natural gas power plants are penalized if they fail to generate the power they promised to. Wind and solar, on the other hand, can sell their power at negative prices and still make a profit because of state purchasing requirements and generous tax credits from the federal government. All this gives wind and solar energy producers a massive economic advantage, allowing them to make money whether they are successful or not. In a world of finite resources, investment in wind and solar has displaced investment in reliable forms of electric generation, like natural gas. However, this oversight does not have to be a hindrance. During the 87th Legislative Session, the engrossed version of Senate Bill 3 contained an intermittent generation resources requirement for ERCOT that was stripped from the bill. This provision would have removed the unequal treatment between hydrocarbon and renewable electricity generation thus providing a fairer market, increased reliability, and lower consumer costs. It's high time we make our electric grid more reliable by leveling the playing field so that cost and reliability drive investment decisions -- not politicians in Austin and Washington, D.C.
As the number one oil and gas producer in the nation, these issues are vital to the Lone Star State and ensuring we have the necessary energy to power our homes, schools, churches, and businesses. With a looming global energy supply crisis and inflation still on the rise, we need more economic certainty not less; we need more oil and gas production, not more clean energy fantasies. As for me, I remain resolved to ensuring Texans have access to cheap, plentiful, and reliable energy.
The Tau 2 BOEM Exploration Plan’s tentative days to drill is ”137 days” .
After reviewing the October 25, 2019 and February 13, 2020 Valaris ‘Fleet Status Reports’ as it pertains to Gulfslope. The two fleet reports reflected Gulfslope’s prior Valaris JU-102 rig contract “start and end month interval” somewhere around the 60 day range. Seems like a standard operating procedure between Gulfslope and Valaris. Does not necessarily mean anything except if this “undisclosed operator” is Gulfslope with a “minimum duration of 68 days”, that would not be such an unusual arrangement. Either way, the Valaris JU 102 rig contract start and end months on the Fleet Report would have to reflect a three month span to capture a “minimum duration of 68 days”.
If it is Gulfslope, there is always the old standby divide “137 days” by 2 and you get 68.5 days, or they just pulled it out of a hat.
Mrs. Smith
Oil inventories declined by 4.6 million barrels - EIA Weekly Petroleum Status Report, Release Date: 1/12/2022
Full Report with Graphs: https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
WTI $84.33/bbl up 0.61% February Contract, 13:13 pm CDT 17/01/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
Summary of Weekly Petroleum Data for the week ending January 7, 2022
HIGHLIGHTS:
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.6 million barrels from the previous week. At 413.3 million barrels, U.S. crude oil inventories are about 8% below the five year average for this time of year. Total motor gasoline inventories increased by 8.0 million barrels last week and are about 3% below the five year average for this time of year. Finished gasoline and blending components inventories both increased last week. Distillate fuel inventories increased by 2.5 million barrels last week and are about 15% below the five year average for this time of year. Propane/propylene inventories decreased by 3.4 million barrels last week and are about 6% below the five year average for this time of year.
U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ending January 7, 2022 which was 293,000 barrels per day less than the previous week’s average. Refineries operated at 88.4% of their operable capacity last week. Gasoline production increased last week, averaging 8.6 million barrels per day. Distillate fuel production decreased last week, averaging 4.8 million barrels per day.
U.S. crude oil imports averaged 6.1 million barrels per day last week, up by 185,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.2 million barrels per day, 10.7% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 589,000 barrels per day, and distillate fuel imports averaged 216,000 barrels per day.
Total commercial petroleum inventories decreased by 4.5 million barrels last week.
Total products supplied over the last four-week period averaged 20.8 million barrels a day, up by 10.8% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels a day, up by 11.8% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels a day over the past four weeks, up by 7.3% from the same period last year. Jet fuel product supplied was up 27.7% compared with the same four-week period last year.
The West Texas Intermediate crude oil price was $79.00 per barrel on January 7, 2022, $3.67 above last week’s price and $26.86 more than a year ago. The spot price for conventional gasoline in the New York Harbor was $2.346 per gallon, $0.072 more than last week’s price and $0.770 above a year ago. The spot price for No. 2 heating oil in the New York Harbor was $2.374 per gallon, $0.163 above last week’s price and $0.890 over a year ago.
The national average retail regular gasoline price increased to $3.295 per gallon on January 10, 2022, $0.014 above last week’s price and $0.978 over a year ago. The national average retail diesel fuel price increased to $3.657 per gallon, $0.044 per gallon more than last week’s price and $0.987 higher than a year ago.
GOM Rig Count is at it’s highest level in almost two years (21 months). Up 12.5% from the previous week.
1/14/2022 GOM Offshore Rig Count increased by 2 rig from the previous week and is currently showing 18 rigs. The Total US Oil and Gas Rig Count reflects 601 rigs an increase of 13 rigs, 2 of which was for GOM Federal waters. Gulfslope’s Tau prospect is located in GOM Louisiana Offshore waters.
https://rigcount.bakerhughes.com
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/WeeklyRigCountUpdate.pdf
WTI $83.82/bbl Up 2.07% - February Contract, 15:00 pm CDT 15/01/2022
https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 1/13/2022 Close
Crude Oil ($/barrel) Percent Change
WTI 81.97 -0.7
Brent 85.80 0.0
Louisiana Light 84.02 -0.
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
Wind and solar will not cut it. Anyway, how many million square miles would we need to cover with wind and solar to replace our current energy sources? They are doing this backwards. Gas and nuclear should be primary, wind and solar should supplement gas and nuclear. Then brownouts and blackouts would be infrequent. I believe France is mostly nuclear. And Germany went to solar and wind. So how did that all turn out? I read that electricity in Germany became very expensive. They also needed gas from Russia and had to restart coal-fired plants to heat their homes this winter. Is this true? More than likely.
If the Republicans take back the Congress or at least the House of Representatives in the mid-term elections 10 months from now, will those renewable government subsidies be funded? Will “green” bills pass? Will the private sector take on the full cost of renewables without the support of government? Do not count on it. If the Republicans take control, they are not going to pay for these “green” subsidies. Private enterprises can still do it, but if it will not be funded or subsidized by the government, these projects would need to be profitable and efficient on their own for the investors to get the investment dollars back. And I do not have a problem with it, if done that way. My issue is do not leave taxpayers, consumers, and our standard of living on the hook for all this. If someone needs to go bankrupt, let it be the “green” investors. Keep government and taxpayers out of it.
And when people do start to move to EV’s for transportation, will we be able to heat and cool our homes, especially at night during peak charge times for EV car batteries. Driving an EV is not free like they want you to believe. You may not need to buy gasoline, but you will need to buy a home charging set-up and pay for high priced electricity. What do you do if you live in an apartment complex? Every apartment unit and parking garage will have to install chargers. You will have to pay for the use of it and it is not free either. You will not be able to drive an EV if you cannot charge it. And I cannot wait until I need to maintain my own charging stations for two vehicles to drive to work, ect.
Enjoyed reading your post NicPapaG.
Mrs. Smith
January 2022 EIA Short-term Energy Outlook “STEO” Forecast: Release Date: January 11, 2022 | Forecast Completed: January 6, 2022 | Next Release Date: February 8, 2022.
Big Note: The EIA’s January 2022 conservative STEO 2022 forecast for WTI increased 7.04% from $66.42/bbl to $71.32/bbl. The EIA’s STEO 2022 Brent forecast increased 7% too from $70.05/bbl to $74.95/bbl. The market likes what it sees!
WTI $81.41/bbl up 4.06% February Contract 14:44 pm CDT 11/01/2022: https://oilprice.com/oil-price-charts/#WTI-Crude
Full Report with Excellent Graphs: https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf
All Figures and Data: https://www.eia.gov/outlooks/steo/data.php?type=figures
FORECAST HIGHLIGHTS for January 2022:
• This edition of the Short-Term Energy Outlook (STEO) is the first to include forecasts for 2023.
• The STEO continues to reflect heightened levels of uncertainty as a result of the ongoing COVID-19 pandemic. Notably, the Omicron variant of COVID-19 raises questions about global energy consumption. U.S. real GDP declined by 3.4% in 2020 from 2019 levels. Based on forecasts that use the IHS Markit macroeconomic model, we estimate U.S. GDP increased 5.7% in 2021 and that it will rise by 4.3% in 2022 and by 2.8% in 2023. In addition to macroeconomic uncertainties, uncertainty about winter weather and consumer energy demand also present a wide range of potential outcomes for energy consumption. Supply uncertainty in the forecast stems from uncertainty about OPEC+ production decisions and the rate at which U.S. oil and natural gas producers will increase drilling.
• Brent crude oil spot prices averaged $71 per barrel (b) in 2021, and we forecast Brent prices will average $75/b in 2022 and $68/b in 2023.
• We estimate global liquid fuels inventories fell by an average of 1.4 million barrels per day (b/d) in 2021 compared with inventory growth of 2.1 million b/d in 2020. Global oil inventories rise in the forecast, increasing at a rate of 0.5 million b/d in 2022 and 0.6 million b/d in 2023.
• Global consumption of petroleum and liquid fuels averaged 96.9 million b/d in 2021, up by 5.0 million b/d from 2020, when consumption fell significantly because of the pandemic. We expect global liquid fuels consumption will grow by 3.6 million b/d in 2022 and 1.8 million b/d in 2023.
• Crude oil production from OPEC member countries averaged 26.3 million b/d in 2021, up from 25.6 million b/d in 2020. We forecast that average OPEC crude oil production will rise by 2.5 million b/d to average 28.8 million b/d in 2022 and average 28.9 in 2023.
• U.S. crude oil production averaged 11.2 million b/d in 2021. We expect production to average 11.8 million b/d in 2022 and to rise to 12.4 million b/d in 2023, which would be the highest annual average U.S. crude oil production on record. The current record is 12.3 million b/d, set in 2019.
• U.S. regular gasoline retail prices averaged $3.02 per gallon (gal) in 2021, compared with an average of $2.18/gal in 2020. We forecast gasoline prices will average $3.06/gal in 2022 and $2.81/gal in 2023. U.S. diesel fuel prices averaged $3.29/gal in 2021, compared with $2.56/gal in 2020, and we forecast diesel prices will average $3.33/gal in 2022 and $3.27/gal in 2023.
• The natural gas spot price at Henry Hub averaged $3.91 per million British thermal units (MMBtu) in 2021. Monthly average prices reached $5.51/MMBtu in October, but they declined in November and December as mild weather prevailed across much of the country, resulting in less natural gas used for space heating. We expect Henry Hub spot prices will average $3.82/MMBtu in the first quarter of 2022 and average $3.79/MMBtu for all of 2022 and $3.63/MMBtu in 2023.
• We estimate that U.S. liquefied natural gas (LNG) exports averaged 9.8 billion cubic feet per day (Bcf/d) in 2021, compared with 6.5 Bcf/d in 2020. We expect U.S. LNG export capacity increases will contribute to LNG exports averaging 11.5 Bcf/d in 2022 and 12.1 Bcf/d in 2023.
• U.S. dry natural gas production averaged 93.5 Bcf/d in 2021, up 2.0 Bcf/d from 2020. Natural gas production in the forecast averages 96.0 Bcf/d for all of 2022 and then rises to 97.6 Bcf/d in 2023.
• U.S. natural gas inventories ended December 2021 at 3.2 trillion cubic feet (Tcf), 3% more than the 2016–20 average. We forecast inventories will end March 2022 at 1.8 Tcf, which would be 8% more than the 2017–21 average for the end of March.
• U.S. coal production totaled 579 million short tons (MMst) in 2021, up 8% from 2020. We expect coal production will increase by 6% in 2022 and then rise 1% to a total of 619 MMst in 2023.
• U.S. coal consumption was 545 MMst in 2021, a 14% increase from 2020. The increase reflected more use of coal-fired electricity generation amid high natural gas prices. We expect coal consumption will fall by 2% in 2022 and then be relatively unchanged in 2023 at a total of 532 MMst in 2023.
• Total U.S. retail sales of electricity remain relatively unchanged in our forecast for 2022 after increasing by 2.2% in 2021. Forecast increases in sales to the commercial and industrial sectors in 2022 offset lower sales to the residential sector. We forecast total U.S. retail sales of electricity across all sectors will grow by 1.4% in 2023.
• The share of U.S. electric power generation produced by natural gas averaged 37% in 2021, and we expect it will average 35% in 2022 and 34% in 2023. Our forecast for the natural gas share as a generation fuel declines primarily as a result of increased generation from new renewable energy generating capacity. Coal’s average generation share rose to 23% in 2021 as a result of higher natural gas prices, but we expect it to decline slightly over the next two years, averaging near 22% in 2022 and 2023. We expect the nuclear share of generation will remain near 20% over the next two years.
• We expect electricity-generating capacity from renewable energy sources to continue to grow in 2022 and 2023. Our forecast includes both wind and solar capacity growth, with solar capacity growing at a faster rate. The extreme drought conditions in the West may moderate somewhat in the next year, and we forecast that the share of U.S. generation from hydropower will rise from 6% in 2021 to 7% in 2022 and 2023.
• The U.S. retail electricity price for the residential sector in our forecast averages 14.2 cents per kilowatthour in 2022, which is 4% higher than the average retail price in 2021. Forecast residential prices remain relatively the same in 2023.
• Total energy-related carbon dioxide (CO2) emissions increased by 6.2% in 2021 as the U.S. economy started to recover from the impacts of the COVID-19 pandemic. We forecast that emissions will rise by 1.8% in 2022 and by 0.5% in 2023. Even with growth over the next two years, forecast CO2 emissions in 2023 are 3.4% lower than 2019 levels. Energy-related CO2 emissions are sensitive to changes in weather, economic growth, energy prices, and fuel mix.
‘Finally, Bloomberg Admits Renewables Mania Caused Energy Shortages’ by Michael Shellenberger, Released January 4, 2022.
Plus, new Environmental Progress Analysis finds German emissions rose in 2021 and will rise again in 2022.
https://michaelshellenberger.substack.com/p/finally-bloomberg-admits-renewables?r=n32ap&utm_campaign=post&utm_medium=email
Between 2017 and 2021, Environmental Progress and I researched and published dozens of articles, testified before Congress, and authored a book, Apocalypse Never, arguing that weather-dependent renewables were making electricity increasingly unreliable and expensive, and making the United States, Europe, and Asia, dangerously dependent on natural gas. In response, there was an organized and somewhat successful effort by progressive climate-renewables activists to cut off our funding, censor us on Facebook, and prevent me from testifying before Congress.
But now, one of the biggest boosters of natural gas and renewables, media giant Bloomberg, whose owner, Michael Bloomberg, is directly invested in natural gas and renewables, has published an article conceding and substantiating almost every single point we have made over the years. “Europe Sleepwalked Into an Energy Crisis That Could Last Years,” screams the headline. The article concludes that the crisis was “years in the making” because Europe is “shutting down coal-fired electricity plants and increasing its reliance on renewables.”
Bloomberg still pulls its punches and misdescribes the situation in some ways. The article, like many other Bloomberg articles, mislabels the deployment of renewables as an “energy transition” similar to past transitions from wood to coal and coal to natural gas, failing to acknowledge that the poor physics of energy-dilute renewables make that impossible. And it suggests that Europe’s energy crisis is the result of ignorance. “The energy crisis hit the bloc,” notes a renewable energy PR person, “when security of supply was not on the menu of EU policymakers,” ignoring the reality that I and others warned EU policymakers of this very crisis.
But, to its credit, the article acknowledges that the energy crisis is a direct result of Europe over-investing in unreliable renewables and under-investing in reliable energy sources. “Wind and solar are cleaner but sometimes fickle,” the authors admit, in the understatement of the year, “as illustrated by the sudden drop in turbine-generated power the continent recorded last year.” (I was the first U.S. journalist to report Germany saw its emissions rise 25% in the first half of 2021 due to lack of wind.)
Now, a new analysis from Environmental Progress finds Germany increased its emissions last year and will likely increase them again this year. This year, German electricity generation coming from fossil fuels will be 44% compared to 39% in 2021 and 37 percent in 2020, assuming weather conditions and electricity demand are similar to 2021. Emissions from Germany’s power sector will rise from 244 million tons in 2021 to 264 million tons in 2022.
And Bloomberg notes that Europe is in a full-blown energy crisis. “The retired salt caverns, aquifers, and fuel depots that hold Europe’s stockpiles of natural gas have never been so empty at this point in winter,” it notes, and “the continent is grappling with a supply crunch that’s caused benchmark gas prices to more than quadruple from last year’s levels, squeezing businesses and households. The crisis has left the European Union at the mercy of the weather and Russian President Vladimir Putin’s wiles, both notoriously difficult to predict.”
It’s true that American natural gas from fracking, a practice I have defended since 2013, is being shipped to Europe, and will ease Europe’s pain. And it hasn’t helped that France’s leaders have grossly mismanaged their nuclear power plants, resulting in an embarrassing 30% decline in their output during the crisis.
But, notes Bloomberg, the relief provided by American liquified natural gas (LNG) is “temporary at best…. Storage sites [for natural gas] are only 56% full, more than 15 percentage points below the 10-year average… Barring an increase in Russian exports, something that doesn’t appear to be in the cards, levels will be at less than 15% by the end of March, the lowest on record… With the two coldest months of winter still ahead, the fear is that Europe may run out of gas.”
And the lack of nuclear energy underscores the need for more nuclear plants since they are reliable and operate independently of the weather when they are managed well. NO MATTER HOW WELL A SOLAR FARM IS MANAGED, IT CAN’T CHANGE THE WEATHER.
And now, Russia is massing troops on its border with Ukraine, and may invade. This is a problem since one-third of Russian gas going into Europe goes through Ukraine. If war breaks out, Europe could suffer serious gas shortages. Overdependence on natural gas and renewables, and underinvestment in nuclear, has thus undermined the energy security, and thus national security, of Europe, since heads of state dependent on Russian gas will be less likely to speak out against an invasion.
Even longtime natural gas and renewable energy boosters agree there’s a crisis. “The ability of Europe and the U.S. to respond to a Russian invasion is constrained both by a desire not to exacerbate Europe’s energy crisis by sanctioning Russian energy exports and, more broadly, by the threat that Russia could retaliate to any confrontation by restricting gas flows into Europe, as Russia did in 2006 and 2009,” Jason Bordoff, a former Obama administration official, told Bloomberg.
Covid accelerated many trends and one of them is the recognition that unreliable and weather-dependent renewables cannot power modern economies. Senator Joe Manchin specifically mentioned the role that renewables are playing in making America’s electricity less reliable when he killed Build Back Better legislation in December. The Netherlands mentioned the need for reliable electricity when it announced plans to expand nuclear energy.
Now, with New England at grave risk of energy shortages for the exact same reasons as Europe, it’s time for the American people and their representatives to fully wake up to the reality that modern societies cannot rely on unreliable renewables. It would also help if the renewable energy industry, and its dogmatic supporters, including Facebook’s Mark Zuckerberg, Rep. Sean Casten, and Rep. Jared Huffman, would stop trying to censor and otherwise shut down the people who raised the alarm about the coming crisis in the first place.