Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Correction on attached post #5295 regarding link to the DOI Department of Interior 8/16/2021 Press Release:
Excerpt: ”Interior will proceed with ‘BOEM’ leasing consistent with the district court’s injunction during the appeal”.
https://www.doi.gov/pressreleases/interior-issues-statement-oil-and-gas-leasing-program
Mrs. Smith
A smidgen of Good News!
Excerpt: ”Interior will proceed with ‘BOEM’ leasing consistent with the district court’s injunction during the appeal”. https://www.doi.gov/pressreleases/interior-issues-statement-oil-and-gas-leasing-program”
This never gets old:
American Petroleum Institute Monthly Report ‘MSR’ released 8/19/2021
API’s Monthly Statistical Report (MSR):
https://www.api.org/-/media/Files/News/2021/08/API_Monthly_Statistical_Report_July_2021.pdf
EXECUTIVE SUMMARY
According to API’s primary data for July 2021, summer driving and gasoline demand led to the highest U.S. petroleum demand since November 2019. Demand increased for the fifth consecutive month despite the crude oil and gasoline prices having risen to their highest levels since 2014.
U.S. crude oil and natural gas liquids production responded positively to the higher prices and together added more than 0.3 million barrels per day (mb/d) between June and July. Drilling activity, which is a leading indicator of production, also picked up for oil and natural gas, according to Baker Hughes.
However, crude oil inventories still fell in July to their lowest level since December 2019, which was a 15.8% y/y decrease to 6.8% above the minimum of 5-year range. Additionally, the U.S. remained a petroleum net importer with higher imports and lower exports in July.
Leading economic indicators remained positive but reinforced concerns for price inflation. API’s Distillate Economic IndicatorTM showed continued growth of U.S. industrial production and broader economic activity (please see the link above for chart details).
Other highlights:
• U.S. petroleum demand (20.6 mb/d) remained solid with summer driving.
– Gasoline demand rose to 9.5 mb/d with summer driving.
– Strongest jet fuel deliveries in 18 months.
– Record July petrochemical demand for other oils.
• Highest sustained refinery capacity utilization (91.4%) since Dec. 2019.
CONTENTS
Demand
• U.S. petroleum demand (20.6 mb/d) remained solid with summer driving.
– Gasoline demand rose to 9.5 mb/d with summer driving.
– Distillate demand eased to 3.9 mb/d in July.
– Strongest jet fuel deliveries in 18 months.
– Residual fuel oil demand picked up with marine shipping.
– Record July petrochemical demand for other oils.
Prices and Macroeconomy
• Highest gasoline prices for any month since October 2014.
• Leading indicators point towards growth, but reinforced price inflation concerns.
Supply
• U.S. crude oil production (11.4 mb/d) and NGL production (5.4 mb/d) stepped up in July.
International Trade
• U.S. a petroleum net importer in July with higher imports and lower exports.
Industry Operations
• Highest sustained refinery capacity utilization (91.4%) since Dec. 2019.
Inventories
• Lowest crude oil inventories since Dec. 2019.
Note: EIA reflects US Crude Oil Inventories dropped by 3.2 million barrels from the week earlier, 8/13/2021 @ 435.5 million barrels.
EiA’s Weekly Petroleum Status Report Data for week ended August 13, 2021:
https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
EIA’s August Drilling Productivity Report: https://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf
EIA’s This Week In Petroleum: https://www.eia.gov/petroleum/weekly/
HIGHLIGHTS - Weekly Petroleum Status Report:
U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week ending August 13, 2021 which was 191,000 barrels per day less than the previous week’s average. Refineries operated at 92.2% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production decreased last week, averaging 4.8 million barrels per day.
U.S. crude oil imports averaged 6.4 million barrels per day last week, down by 46,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.4 million barrels per day, 14.1% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 743,000 barrels per day, and distillate fuel imports averaged 142,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.2 million barrels from the previous week. At 435.5 million barrels, U.S. crude oil inventories are about 6% below the five year average for this time of year. Total motor gasoline inventories increased by 0.7 million barrels last week and are about 3% below the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 2.7 million barrels last week and are about 8% below the five year average for this time of year. Propane/propylene inventories increased by 1.4 million barrels last week and are about 18% below the five year average for this time of year. Total commercial petroleum inventories decreased by 5.3 million barrels last week.
Total products supplied over the last four-week period averaged 20.8 million barrels a day, up by 13.2% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels a day, up by 8.4% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels a day over the past four weeks, up by 10.9% from the same period last year. Jet fuel product supplied was up 56.1% compared with the same four-week period last year.
The West Texas Intermediate crude oil price was $68.36 per barrel on August 13, 2021, $0.10 above last week’s price and $26.31 more than a year ago. The spot price for conventional gasoline in the New York Harbor was $2.263 per gallon, $0.002 less than last week’s price but $1.029 above a year ago. The spot price for ultra-low sulfur diesel fuel in the New York Harbor was $2.063 per gallon, $0.013 below last week’s price but $0.839 over a year ago.
The national average retail regular gasoline price was $3.174 per gallon on August 16, 2021, $0.002 per gallon more than last week’s price and $1.008 over a year ago. The national average retail diesel fuel price was $3.356 per gallon, $0.008 below last week’s price but $0.929 over a year ago.
OPEC petroleum production forecast revised down for 2021
In our August Short-Term Energy Outlook (STEO), we forecast that total world petroleum production will average 98.9 million barrels per day (b/d) in the second half of 2021 (2H21), down from a forecast of 99.4 million b/d in the July STEO. The change is driven mostly by forecast changes to petroleum production from OPEC and Russia as a result of the most recent OPEC+ agreement.
We decreased our forecast for world petroleum production in 2021 because of lower forecast production from OPEC, which is only slightly offset by increased forecast production from Russia. We forecast that global petroleum production in 2022 will average 101.8 million b/d—20,000 b/d less than we forecast in the July STEO.
On July 18, OPEC+, which includes OPEC and several non-OPEC members (including Russia), agreed to increase monthly crude oil production starting in August 2021. The latest agreement calls for total OPEC+ crude oil production to increase by 400,000 b/d each month until the previous production cuts are fully reversed, which would occur by the third quarter of 2022 if implemented at that rate. However, OPEC+ extended the production agreement to include monthly meetings through the end of 2022 so that it can adjust production targets as necessary.
In the August STEO, we forecast that OPEC total petroleum production will average 33.0 million b/d in 2H21, down 600,000 b/d from the July forecast for the same period. In the July STEO, we expected that OPEC would raise production by more than the group ultimately agreed to in order to meet global demand. We expect most OPEC countries will fully comply with the agreement during 2H21.
We revised our forecast for OPEC petroleum production in 2022 up by 40,000 b/d from the July STEO to average 34.2 million b/d. In 2022, we expect OPEC+ monthly petroleum production increases to total less than 400,000 b/d to avoid oversupplying the markets and pushing down the price of crude oil. However, we expect that some countries will produce more petroleum as a result of their increased baselines starting in May 2022, including the United Arab Emirates, Kuwait, and Iraq.
Our forecast assumes that existing sanctions against Iran will remain in place through the end of the forecast period. However, our forecast includes rising petroleum production from Iran over that period despite sanctions remaining in place. We assume that OPEC will not adjust petroleum production levels to accommodate this increase.
Despite changing the outlook for future petroleum production in the August STEO, our crude oil price forecast remains mostly unchanged from the July STEO.
https://www.eia.gov/todayinenergy/detail.php?id=49196
Source: EIA August (STEO)
August 2021 ENERGY SLIDESHOW, Federal Reserve Bank of Dallas, Updated August 11, 2021:
https://www.dallasfed.org/-/media/Documents/research/energy/energycharts.pdf?la=en
https://www.dallasfed.org/research/energy/indicators/2021/en2104.aspx
Mrs. Smith
‘The Dawn Of A New Era In Deepwater Drilling’, By David Messler - Aug 11, 2021
https://oilprice.com/Energy/Crude-Oil/The-Dawn-Of-A-New-Era-In-Deepwater-Drilling.html
A new era in deepwater drilling is about to begin. With the sanctioning of the Anchor project super-major operator, Chevron, NYSE: CVX) signaled that it was ready to risk billions tapping the ultra-high pressure, Lower Wilcox Tertiary play, some 35,000 feet below the mudline. At least two other projects are in advanced FID status with several more under review. In this article we will look at some of the key players in this “final frontier” for the Gulf of Mexico, and why they are gearing up to exploit this remote reservoir. We will also look at one we feel is particularly poised to reap the bulk of this activity and the profits that will come from it.
One of the biggest deepwater drillers, Transocean, (NYSE:RIG) notes in an investor packet that in the next few years a number of opportunities could be spun from the success of the Anchor (sanctioned) project and the North Platte and Shenandoah projects (nearing sanction).
RIG sees a healthy candidate pool for its unique 20K psi BOP drillships, the Deepwater Atlas and the Deepwater Titan. These are the only two rigs with this rating, and probably the only two of these billion-dollar babies that will be built from scratch.
Valaris, (NYSE:VAL) announced in its quarterly conference call that its 7th generation drillship, the DS-11 will be restored from “preservation stack”, and kitted out with a 20K psi BOP. This rig, when properly configured, will be used to drill the North Platte project for Total Energies, (NYSE:TTE), with a 2024 start date. VAL will receive upfront payments for the upgrade and those costs are not included in the $1.3 bn increase in backlog from Q-1.
With only three of these high-specification rigs being planned, compensation should be well above the average ~$225K per day most of the still-active 7th generation drillships are receiving. Here’s what we know.
The value of the Anchor contract is $830 mm and over the 5-year life of the contract amounts to $455 per day. A fairly skinny deal when you factor in the additional capex for the 20K BOP stack and ancillary equipment. It was struck a couple of years ago, in the heart of the downturn. I think future contracts will improve markedly on the announced contract value for Chevron (CVX).
As an indication of progress, we can take the estimated $490K day rate for the Deepwater Atlas for Beacon Offshore's Shenandoah project. A 4-well deal that was pending sanction news by the end of July. Crickets so far.
There is also some discussion about the fact that the end of July came and went without a sanctioning announcement for Shenandoah. I don't have a seat in the boardroom at Beacon, but I can tell you that this is the hottest thing they have going. If they don't develop this massive, 1,000' net pay, light oil interval, with subsea export for the oil to any number of nearby hosts - Jack, Kaskida, St. Malo, Cascade among them, and export of the gas to the Discovery gas plant in Louisiana, I would have to question their raison d'etre.
A brain-child of Blackstone Energy Partners, Beacon was formed in 2016 for the express purpose of developing high-quality oil reservoirs in the GoM. Beacon owns interests in a number of ongoing and pre-FID projects that include Blue Wing, Olive, Buckskin, Claiborne, Crown & Anchor, La Femme, McKinney, Moccasin, Praline, Red Zinger, Shenandoah, Stonefly, and Yucatan. Many of these are just a hop, skip, and a jump from Shenandoah. There is little doubt in my mind that Shenandoah goes forward.
As to North Platte, my expectation is the day rate for the DS-11 will amount to about half the value of the contract awards VAL announced. With a 1,277 day term, that would work out to ~$470K per day. Quite a bit better than RIG’s deal for Anchor, particularly when you take into account, RIG had to shoulder the cost for the 20K BOP stack. It should also be noted that the start date in 2024 is far enough away that it’s unlikely VAL gave it away cheaply. Thomas Burke, CEO of Valaris commented in the Q-2 analyst call-
“U.S. Gulf operators have expedited drillship selections this year in anticipation of a lack of supply in early 2022, which has played a key role in pushing day rates in this market higher.”
We will circle back to provide some analysis of this improvement in the state-of-play for the deepwater drillers as we close out this article. For now, let’s dive into what is driving this ground breaking push into the Lower Wilcox.
The GoM is a unique area with broad areas of sediment burial depths up to 30-35K feet below the mudline in water depths of 6-7000 feet, generating these incredible pressures. You find this exact scenario only sporadically in other areas of the world.
As noted above the Lower Tertiary Wilcox turbidite sands are the principal target in these projects. This is a resource that has a hundred-year history of providing oil and gas in generous quantities. The oil industry knows it well. The onshore Wilcox trend is estimated to have provided ~24 TCF of gas in that time.
As Meyer et al, noted in a comprehensive World Oil article in 2005, it took some imagination to think the Wilcox petroleum systems existed ~250 miles offshore in the ultra deepwaters of the GoM. The BAHA #2 first demonstrated its existence in 2001, and later Great White set the western boundary and Cascade set the eastern boundary. A contiguous field spanning some 350 miles in length and 150 miles in breadth, where infill discoveries over the last 20 years have found ~15 bn barrels of oil, with an estimated equal amount remaining to be discovered and produced.
The thing that draws the drill bit in the deepwater Lower Wilcox is the high flow characteristics of the reservoir, as noted by Dice. Comprised of a well-sorted, quartz-rich sandstone with porosity in the 20-25% range, and permeability averaging 10 mD across the play, in comparison to the Upper Wilcox, the Lower Wilcox exhibits a......stronger pore-level framework and resistance to compaction and porosity reduction.
The final carrot is the oil quality from the Lower Wilcox, ranging between 28 and 38 gravity and produced from thickness accumulations running into the hundreds of feet of vertical depth.
The producing Wilcox projects are almost a decade old. Their rates are falling and either they will soon enter terminal declines where it is no longer economic to produce them or be put on water/polymer flood. What is certain that as 90+% off offshore production (~1.8 MM BOPED) comes from deepwater projects, these projects must be replaced and the Lower Wilcox is about the last place left for major finds in the GoM. Unless of course we were able to tap the Eastern GoM, but that's been off-limits to development for decades. A scenario that’s unlikely to change anytime soon.
Finally, one of the things that makes the GoM so attractive is the huge installed equipment base. With 25 years of deepwater activity behind us in the U.S. GoM, the infrastructure advantages many of the projects we have discussed with export options already in place. Hundreds of billions of dollars-worth of facilities are in a state of declining use as older wells peter out. All of the projects we’ve discussed in this article are made possible in-part by not having to FID long undersea pipelines or massive host platforms.
The GoM has been for decades a reliable source of oil and gas, and with success in this new Lower Wilcox play, this productivity may be extended for several more.
There has been a substantial sell-off in energy-related equities in the last few weeks. RIG which in early July, was selling at $5.13 per share, means in retrospect there was a lot of optimism priced into the stock. At ~$3.50 the reverse is true.
I discussed some likely outcomes for oil in a recent OilPrice article. Nothing has really changed other than the market's short term sentiment. As noted in the linked article, this is largely due to OPEC+ spat - which is being worked out - and concerns about the Delta variant slowing the economic recovery. Inflation jitters aren't helping anything either. Inflation is a tax on growth, and there could be some headed our way - you don't print ten-trillion dollars in six months without debasing the currency to some extent. My view is the worst fears are overstated and the amazing American economy will pull us out of prolonged period of inflation.
RIG is trading right about 3.5X their 2020 OCF of ~$600 mm on an annualized basis. A week ago that factor was almost 5X. If you buy my argument that their utilization and day rates will improve modestly in 2022 their cash from operations could at least double by year-end '22. This is a bullish view that actually exceeds RIG’s own forecast of ~$962 mm through YE 2022. If these numbers are attained on the back of improved day rates the stock should get into the $7-10.0 range and justify the risk.
As always we should add that the deepwater drillers are among the riskiest of investments with capital appreciation at the start of a new cycle being the only reason to invest. That said the dark days of the past six-years appear to be fading, and some new optimism provides a reasonable investment case for risk-tolerant investors.
By David Messler for Oilprice.com
Mr. Messler is an oilfield veteran, recently retired from a major service company. During his thirty-eight year career he worked on six-continents in field and office assignments. He currently maintains an independent training and consulting practice, and writes on energy related topics.
OPEC FEATURE ARTICLE, Released 8/12/2021, Source: August 2021 MOMR
CRUDE AND PRODUCT PRICE MOVEMENTS
The global oil market has seen a significant improvement in its fundamentals this year, translating into lower crude oil price volatility compared with 2020. The pick-up in oil demand, coupled with a large drop in oil inventories and reduced uncertainty in the market, has caused crude and oil product prices to rebound strongly, surpassing levels reached before the onset of the COVID-19 pandemic. The ICE Brent and NYME WTI futures contracts rose steadily over the past several months, up by $24.1 and $25.4, or 48% and 54%, respectively, between December 2020 and July 2021. Oil prices were supported by much improved economic conditions, with firm equity markets and large economic stimulus packages, as well as a gradual rise in oil demand and the anticipation of a further recovery amid optimism about accelerated vaccination rollouts in most major economies. Market confidence has also improved as OPEC and participating non-OPEC countries in the Declaration of Cooperation (DoC) maintained strong conformity levels in their voluntary production adjustments. However, the most current resurgence of new COVID-19 variants in several regions has impacted oil prices in recent days.
In terms of market structure, the backwardation of major crude benchmarks had strengthened since early 2021, mirroring stronger market fundamentals. The ICE Brent and NYMEX WTI M1-M3 spread both widened again in July to a backwardation of about $1.5/b, on expectations of a market deficit in 2H21. The transatlantic spread between ICE Brent and NYMEX WTI tightened in 2Q21 and continued to narrow in July, to settle at $1.86/b. WTI futures performed better than ICE Brent, as the rebalancing process in the US accelerated, amid robust oil demand and strong economic growth in that country, slow growth in oil supply and a large decline in crude stocks.
On the product side, fuel prices showed a substantial recovery this year in response to stronger crude prices. Moreover, the lifting of restrictions and subsequent improvement in fuel consumption levels helped ease the product surplus seen in 2020. In addition, the seasonal uptick in personal transport mobility activity in summer provided further support.
At the top of the barrel, gasoline production in the US in 1H21 was affected by the arctic freeze, the Colonial pipeline shutdown, spring floods and the turnaround season. As a result, US gasoline supplies suffered a considerable contraction, which led to sharp downward pressure on inventory levels and pushed gasoline prices to skyrocket back to pre-COVID levels. This gasoline shortage in the US opened up export opportunities and helped gasoline prices, to a more limited extent, in other regions as well. At the middle of the barrel, global gasoil prices remained sustained, supported by healthy economic activity, although jet/kerosene prices in Asia and in Europe lagged, due to the weak recovery in international and business air travel. High sulphur fuel oil (HSFO) prices in all regions rose, although volume availability surged in the US and Asia amid weak demand. In July, stronger LNG prices, robust power demand and hot weather all point to a boost in HSFO consumption and crack spreads.
Looking forward, refined product prices in 2H21 are likely to continue benefiting from a seasonal strength in transport fuels, although current high refinery run rates could dampen some of the upside in the immediate near term. Moreover, changes in crude prices, as well as a potential decline in fuel output over the peak autumn maintenance season, particularly around September, could lead to additional product price volatility. Meanwhile, unplanned outages, especially weather-related supply disruptions due to a forecast heavy hurricane season in the US, and concerns over possible renewed lockdowns, may also add to the volatility. Amid this precarious outlook, the vigilance and determined efforts by the countries participating in the DoC will remain ever more important in striving to maintain a stable and balanced market.
OPEC August 2021 ‘Monthly Oil Market Report’, MOMR Release date: 8/12/2021
MOMR PDF: https://momr.opec.org/pdf-download/res/pdf_delivery_momr.php?secToken2=accept
MOMR Video: https://players.brightcove.net/34306109001/default_default/index.html?videoId=6267503862001
Crude Oil Price Movements
Crude oil spot prices rose in July, m-o-m, as physical market fundamentals and declining oil inventories continued to support oil prices. The OPEC Reference Basket (ORB) averaged $73.53/b in July, representing an increase of $1.64, or 2.3%, m-o-m, the highest level since October 2018. Year-to-date, the ORB was up $25.43, or 63.8%, compared with the same period last year, to average $65.27/b. Crude oil futures prices also extended gains in July, buoyed by the outlook for strong oil market fundamentals. The ICE Brent front month increased by 88¢, or 1.2%, m-o-m to average $74.29/b in July, while NYMEX WTI gained $1.08, or 1.5%, m-o-m to average $72.43/b. Consequently, the Brent/WTI futures spread narrowed further in July by 20¢ to $1.86/b, its narrowest since October 2020. The market structure of all three major oil benchmarks remained in steep backwardation in July, as the oil market outlook remained robust and the market rebalancing process continued, amid a further decline in OECD oil stocks. However, hedge funds and other money managers sharply reduced their net long positions in July, particularly in WTI, after a selloff was seen in US equity markets and concerns heightened about the rapid spread of the Delta variant.
World Economy
Global economic growth forecasts for both 2021 and 2022 were revised up by 0.1 pp, and hence growth for 2021 now stands at 5.6%, while growth in 2022 is now expected at 4.2%. However, the forecast for global growth continues to be impacted by uncertainties, including the spread of COVID-19 variants and the pace of the vaccine rollout worldwide. In addition, sovereign debt levels in many regions, together with inflationary pressures and central bank responses, remain key factors that require close monitoring. After lower-than- expected 2Q21 GDP growth, US economic growth for 2021 is revised down to 6.1% from 6.4% previously, while growth for 2022 is revised up to 4.1% from 3.6%. Euro-zone economic growth in 2021 is revised up to 4.7% from 4.1%, while growth for 2022 is revised up to 3.8% from 3%. Japan’s economic growth forecast remains at 2.8% for 2021, followed by growth of 2.0% in 2022. Meanwhile, China’s economic growth forecast for 2022 is revised down to 6% from 6.3%, following growth of 8.5% in 2021, unchanged from the previous month’s assessment. India’s 2021 growth forecast is revised down to 9.3%, followed by growth of 6.8% in 2022. Brazil’s growth forecast for 2021 is revised up to 4.2% from 3.2%, followed by growth of 2.5% in 2022. Russia’s forecast for both 2021 and 2022 is revised up by 0.2 pp to stand at 3.2% and 2.5%, respectively.
World Oil Demand
World oil demand growth expectations for 2021 remained unchanged from the previous month’s assessment. This is despite the above slight upward revision to economic growth, as the upwardly revised increment of the economic recovery is projected to be mainly in non-oil-intensive sectors. Oil demand is still estimated to increase by around 6.0 mb/d to average 96.6 mb/d. However, some revisions were taken into account in 1Q21 due to slower-than-anticipated demand in OECD Americas, offset by better-than-expected data from non- OECD countries in 2Q21. For 2022, world oil demand is still projected to increase by 3.3 mb/d y-o-y, unchanged from last month’s assessment. Total world oil demand is projected to surpass the 100 mb/d threshold in 2H22 and reach 99.9 mb/d on average for the whole of 2022. Economic activities are still projected to gain traction, supported by massive stimulus packages. Additionally, the COVID-19 pandemic is anticipated to be controlled by vaccination programmes and improved treatment, resulting in a further recovery in economic activity and a steady rise in oil demand in both the OECD and non-OECD.
World Oil Supply
Non-OPEC liquids supply growth forecasts in 2021 and 2022 have been revised up by 0.27 mb/d and 0.84 mb/d, respectively. These revisions are mainly due to the incorporation of the latest production adjustment decision of the non-OPEC countries participating in the Declaration of Cooperation (DoC), which are now considered, following the successful conclusion of the 19th OPEC and non-OPEC Ministerial Meeting on 18 July 2021. In addition, supply from the US and Canada is also subject to revisions this month. Non-OPEC liquids are now expected to grow by 1.1 mb/d in 2021 to average 64.0 mb/d. The main drivers for 2021 supply growth are anticipated to be Canada, Russia, China, the US, Norway and Brazil, with the US now expected to see y-o-y growth of 0.12 mb/d. For 2022, liquids supply is now expected to grow by 2.9 mb/d following new incremental production adjustments by the DoC’s non-OPEC members, led by Russia with 1.0 mb/d. The US, with y-o-y growth of 0.8 mb/d, together with Brazil, Norway, Canada and Guyana, will be the other key drivers. OPEC NGLs are forecast to grow by 0.1 mb/d y-o-y in both 2021 and 2022 to average 5.2 mb/d and 5.3 mb/d, respectively. OPEC crude oil production in July increased by 0.64 mb/d m-o-m, to average 26.66 mb/d, according to available secondary sources.
Product Markets and Refining Operations
Global refinery margins trended upwards in July, supported by seasonal strength in transport fuels, with robust performance registered at the top of the barrel. In the US, a counter-seasonal decline in refinery utilization rates and subsequent downward pressure on product inventories lifted product markets. In Europe, refining margins benefitted from a reduction in utilization rates within the region registered in late June, as well as a tighter balance in major product markets due to limited product arrivals. This took place amid sustained road transport fuel consumption linked to softer mobility restrictions. Meanwhile, healthy regional fuel consumption levels in Asia, as well as robust petrochemical feedstock demand led to gains for clean products.
Tanker Market
Market developments in the month of July provided little momentum to the languishing tanker market, with dirty freight rates remaining at subdued levels. While the demand for tankers is expected to pick up in 2H21, reducing some of the excess in tonnage availability amid increased scrapping, the rapid spread of the Delta variant has added some uncertainty regarding demand for products and crude, potentially pushing the tanker market recovery further into 2022.
Crude and Refined Products Trade
US crude imports were broadly flat in July at near 18-month highs, averaging 6.5 mb/d, while crude exports dropped back to 2.7 mb/d, amid reduced flows to India. Japan’s crude imports plunged almost 20% m-o-m in June to average 1.9 mb/d, undermined by renewed lockdown measures and reduced expectations for a boost in consumption due to the Olympic Games in Tokyo. Meanwhile, China’s crude imports rose m-o-m in June, but remained at lower levels, averaging 9.8 mb/d, as government efforts to rein-in teapot refineries and crackdown on import quotas and tax irregularities dampened inflows. China’s crude imports are expected to be capped close to current levels over the coming months as refiners continue to destock within increased government oversight. India’s crude imports fell further in June, reaching an eight-month low of 3.9 mb/d, affected by refinery maintenance and ongoing Delta variant impacts. In contrast, India’s product imports rebounded by 20% m-o-m to average 0.9 mb/d, led by a strong jump in LPG and naphtha inflows, as economic activity returned.
Commercial Stock Movements
Preliminary data for June sees total OECD commercial oil stocks down by 23.0 mb m-o-m. At 2,922 mb, inventories are 289.4 mb lower than the same month a year ago, 90.4 mb lower than the latest five-year average and 25.2 mb below the 2015–2019 average. Within components, crude stocks fell by 38.3 mb m-o-m and product stocks were up by 15.3 mb. At 1,416 mb, OECD crude stocks stood 96.2 mb below the latest five-year average and 70.5 mb below the 2015–2019 average. Measuring 1,507 mb, OECD product stocks exhibited a gain of 5.8 mb above the latest five-year average, and were 45.3 mb above the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks fell m-o-m by 0.9 days in June to stand at 63.6 days. This is 12.4 days below June 2020 levels, 1.0 day below the latest five-year average, but 2.0 days above the 2015–2019 average.
Balance of Supply and Demand
Demand for OPEC crude in 2021 was revised down by 0.2 mb/d from the previous month assessment to stand at 27.4 mb/d, around 4.7 mb/d higher than in 2020. Demand for OPEC crude in 2022 was revised down by 1.1 mb/d from the previous month’s assessment to stand at 27.6 mb/d, around 0.2 mb/d higher than in 2021.
August 2021 (MER) Monthly Economic Review
Synopsis: Fast Pace of Economy Comes with Aches and Pains
We are now in the second half of 2021, and the economy has heated up along with the summer temperatures. Gross domestic product surpassed its pre-crisis peak during the second quarter and vigorous growth is expected throughout the rest of the year. It is a very different year from 2020 and a much better one. The economic momentum has been helped by government monetary and fiscal policies and, more importantly, by the rollout of COVID-19 vaccinations. These drivers of the economy are still helping but are fading. Monthly child tax credit checks that began in July could help, but the pace of vaccinations has slowed considerably, stimulus checks have been spent or tucked away, half the states have ended supplemental unemployment benefits and those benefits will expire for everyone else after Labor Day.
The National Bureau of Economic Research – the official arbiter of when a recession has occurred – announced last month that the recession brought on by the pandemic ended in April 2020. The official recession lasted just two months, the shortest downturn on record, but by no means does that mean the economy has fully recovered. While most economic measurements have returned to pre-pandemic levels, employment has lagged with approximately 7 million fewer workers on payrolls today than in February 2020. The unemployment rate remains elevated at 5.9 percent, compared with a half-century low of 3.5 percent before the downturn.
Vaccination is the key to further economic recovery, reopening and rebuilding. As of last week, only 56.9 percent of the U.S. population had received at least one dose and only 49.2 percent were fully vaccinated, according to the Centers for Disease Control and Prevention. With the outlook for the global economy continuing to hinge on public health, vaccine numbers are extremely important not just for the United States but also the whole world. The latest Blue Chip Economic Indicators report says the biggest threat to global stability is an uneven rollout of vaccines and the emergence of additional variants while the biggest impetus for growth is faster-than-expected global vaccination.
There has been a pickup in COVID-19 cases across the United States tied to the delta variant but there is no evidence that the variant is impacting consumer behavior so far. Increased infection rates and renewed mask mandates might have an impact, but at this point consumer activity during the third quarter is continuing to resemble pre-pandemic behavior as the reopening of stores and the economy progresses. Households are flush with cash and consumers have become mobile again as they shop at stores, visit restaurants, enjoy entertainment events and take trips. Consumer spending in June indicated strength heading into the third quarter. June’s solid year-over-year retail sales increase of 18 percent as reported by the Census Bureau signaled a further reopening of the economy for many retailers that had seen weak sales during the pandemic. Department, clothing and electronic stores all showed steep declines during the pandemic but have shown faster sales increases than other retail sectors over the last few months. Back-to-school shopping will also contribute to retail sales in these sectors, and NRF’s consumer survey estimates that combined K-12 and college sales will increase approximately 6 percent over last year. With retail sales up 16.4 percent year-over-year for the first six months of the year, we are in line with NRF’s revised forecast that 2021 sales should grow between 10.5 and 13.5 percent over 2020.
While retail spending was strong in June, there was a pullback in the mid-July University of Michigan Consumer Sentiment Index to 80.8 from 85.5 the month before. The rise in gasoline prices has sparked inflation concerns and fears around the delta variant of COVID-19 are also likely weighing on confidence.
It is apparent that this is the fastest pace of expansion in decades, but it comes with aches and pains. The lack of available labor, shortages of products and services and bottlenecks in supply chains are creating friction and resulting in higher prices. It is unusual to be concerned about inflationary pressures so soon after a recession, but the current environment is far from ordinary. Inflation expectations can become self-fulfilling and are being watched closely by the Federal Reserve, market analysts and businesses alike. If workers believe prices will keep rising, they will demand raises, which will force employers to raise prices in a continuing cycle. The Federal Reserve Bank of Atlanta’s Wage Growth Tracker showed both hourly and weekly wage growth of 3.2 percent in June on a three-month moving average. In addition, consumers surveyed by the University of Michigan in mid-July expected inflation of 4.8 percent over the next year, the highest level since July 2008, when rising crude oil prices hit. Conversely, the Federal Reserve’s second-quarter Index of Common Inflation Expectations – incorporating nearly two dozen inflation forecasts – showed modest expected growth of approximately 2.75 percent.
In my view, the current degree of inflation is unlikely to persist beyond the next 12 months or so, consistent with the Fed’s “transitory” characterization. Inflation is expected to peak in the coming months as many of the drivers of the recent acceleration in prices fade away. However, the exact timing and magnitude is more uncertain due to supply constraints on goods. Consequently, I am keeping a close eye on actual prices and household expectations as they relate to the current outlook for spending. Nonetheless, with the Fed’s adoption of “average inflation targeting” that makes 2 percent inflation a longer-term goal but not an upper limit, it is likely that monetary policy will be geared toward letting inflation be reasonably above that level for a period of time.
By Jack Kleinhenz, Ph.D., Chief Economist. National Retail Federation (NRF), Published August 3, 2021.
https://cdn.nrf.com/sites/default/files/2021-08/2021%20Aug%20MER.pdf
https://nrf.com/research/monthly-economic-review-august-2021
8/11/2021 EIA’s Summary of Weekly Petroleum Data for the week ending August 6, 2021
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.4 million barrels from the previous week. At 438.8 million barrels, U.S. crude oil inventories are about 6% below the five year average for this time of year. Total motor gasoline inventories decreased by 1.4 million barrels last week and are about 3% below the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.8 million barrels last week and are about 6% below the five year average for this time of year. Propane/propylene inventories decreased by 0.6 million barrels last week and are about 18% below the five year average for this time of year. Total commercial petroleum inventories decreased by 0.1 million barrels last week.
U.S. crude oil refinery inputs averaged 16.2 million barrels per day during the week ending August 6, 2021 which was 277,000 barrels per day more than the previous week’s average. Refineries operated at 91.8% of their operable capacity last week. Gasoline production decreased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging 4.9 million barrels per day.
U.S. crude oil imports averaged 6.4 million barrels per day last week, down by 36,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.6 million barrels per day, 16.3% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 925,000 barrels per day, and distillate fuel imports averaged 185,000 barrels per day.
Total products supplied over the last four-week period averaged 20.6 million barrels a day, up by 11.3% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels a day, up by 8.5% from the same period last year. Distillate fuel product supplied averaged 3.9 million barrels a day over the past four weeks, up by 8.4% from the same period last year. Jet fuel product supplied was up 45.8% compared with the same four-week period last year.
Data Overview Tables: https://ir.eia.gov/wpsr/overview.pdf
Summary: https://ir.eia.gov/wpsr/wpsrsummary.pdf
WTI September Contract $/bbl: https://oilprice.com/oil-price-charts/45
“OK, Houston we have a problem here”, “Say again please”, “Houston, we have had a problem”
You are partially correct, in the end NO ONE person, government official or governmental agency is above the law.
When all is said and done it will be upheld.
Mrs. Smith
WASHINGTON, DC – The attorneys general of Louisiana, Alabama, and Alaska have filed a motion to compel President Biden to comply with a preliminary injunction order issued by the US District Court for the Western District of Louisiana. On June 15, that court granted a preliminary injunction against US Interior Department’s pause on federal oil and gas leasing.
As reported by National Ocean Industries Association (NOIA), in the motion, the states argue that:
"Defendants have acted as if this Court’s findings, conclusions of law, and compulsory order do not exist. They have taken no actions to reinstitute Lease Sale 257; they have not, for instance, revoked the Rescission of the Record of Decision or published the Final Notice of Sale. Neither step would require vast work or resources—both documents already exist. Once these steps were taken, BOEM would need to hold the Lease Sale—an action it is more than capable of executing. It has not done so and thus has violated this Court’s clear order, and remains in violation of OCSLA and the Administrative Procedure Act. See NASCO, Inc., 583 F. Supp. at 120 (party must be “reasonably diligent and energetic in attempting to accomplish what was ordered”); see also Calvillo Manriquez v. Devos, 411 F. Supp. 3d 535, 539 (N.D. Cal. 2019) (finding contempt because “Defendants’ attempt to comply with the preliminary injunction consisted of a single email to each service provider and partial confirmation of receipt of those emails” rather than “the normal actions one would expect from an entity facing a binding court order: multiple in-person meetings or telephone calls to explain the preliminary injunction and to confirm that the contractors were complying with the preliminary injunction”)."
Accordingly, the states have made the following request of the court:
"[T]he Court should order Defendants to do the following. First, revoke the Rescission of the Lease Sale 257 Record of Decision. Second, publish the Final Notice of Sale within seven days. Third, hold Lease Sale 257 within forty-five days after publication of the Final Notice of Sale. Fourth, provide weekly status reports affirming their compliance with these deadlines."
In its note, NOIA points out that there is still no information from Interior on the department’s plans for (1) the report on federal oil and gas leasing; (2) lease sales under the 2017-2022 OCS Leasing Program; or (3) the development of the 2022-2027 OCS Leasing Program.
‘States file motion to compel Biden to comply with court order’, Offshore-mag.com, August 10, 2021
https://www.offshore-mag.com/regional-reports/us-gulf-of-mexico/article/14208448/states-file-motion-to-compel-biden-to-comply-with-court-order
Note: Gulfslope Energy’s prospects are all in Louisiana Offshore waters.
‘Oil Prices Bounce Back As Market Demand Recovers’, By Tom Kool - Aug 10, 2021, 2:00 PM CDT
https://oilprice.com/Energy/Energy-General/Oil-Prices-Bounce-Back-As-Markets-Demand-Recovers.html
spec, I look forward to the “short version” of the August OPEC Monthly Oil Market Report (MOMR) I will be posting on Thursday, August 12th. Warning, the MOMR PDF is close to 100 pages, but I will attach the more manageable and uncomplicated video version for you.
Would someone please, please slap WG’s Gulfslope ask.
THANK YOU.
Mrs. Smith
The EIA’s “August” STEO forecast for WTI “average” price per barrel remains relatively unchanged.
August 2021 STEO - WTI Crude Oil - Average Price (dollars per barrel)
2019 2020 2021 2022
56.99 39.17 65.93 62.30
July 2021 STEO - WTI Crude Oil - Average Price (dollars per barrel)
2019 2020 2021 2022
56.99 39.17 65.85 62.97
June 2021 STEO - WTI Crude Oil - Average Price (dollars per barrel)
2019 2020 2021 2022
56.99 39.17 61.85 56.74
SHORT-TERM ENERGY OUTLOOK (STEO)
Release Date: August 10, 2021, Forecast Completed: August 05, 2021
Next Release Date: September 8, 2021
https://www.eia.gov/outlooks/steo/
https://www.eia.gov/outlooks/steo/data.php?type=tables
WTI $/bbl September Contract: https://oilprice.com/oil-price-charts/45
Notable Forecast Changes
* We expect OPEC crude oil production to average 27.6 million barrels per day (b/d) in the second half of 2021 (2H21), about 0.6 million b/d lower compared with our previous forecast. Our forecast of lower OPEC crude oil production reflects the July 18 OPEC+ announcement that calls for participating countries to collectively increase supply by 0.4 million b/d per month from August to December 2021, a production increase that is lower than we previously anticipated. Forecast OPEC crude oil production in 2022 is about 0the same as our July forecast, with higher-than-expected output in the second half of the year offsetting lower forecast production in 1Q22, which is consistent with higher OPEC production baselines that were also announced on July 18.
* In our August STEO, we revised down our 2022 jet fuel consumption forecast by 80,000 b/d to 1.6 million b/d. The lower jet fuel forecast reflects a lower GDP forecast by IHS Markit. It also reflects our assumption that increases in jet fuel consumption will occur more slowly than we has previously forecast. The largest downward revision is for 2H22, when we forecast jet fuel consumption will average 1.7 million b/d, down from 1.8 million b/d in the July forecast.
* We forecast Henry Hub spot prices will average $3.59 per million British thermal unit (MMBtu) in 2H21, an increase of 40 cents/MMBtu from last month’s STEO. High demand for electricity generation because of record-high temperatures in June led to strong consumption of natural gas in the electric power sector, supporting higher prices into July and August. We expect Henry Hub spot prices to decline over the forecast period as temperatures return closer to historical averages, U.S. dry natural gas production increases, and growth in liquefied natural gas export growth slows.
* We have updated our modeling of electricity generation to better account for regional emissions restrictions and fuel contracts. These changes have the general effect of limiting future growth in coal-fired generation. As a result, the impact on forecast coal-fired generation in 2021 from our increased forecast for natural gas prices is generally offset by the effect of the new model constraints that limit growth in coal-fired generation. Thus, our forecast for U.S. coal and natural gas generation are relatively unchanged from last STEO.
* We corrected calculations for several of the industrial production indexes in tables 9a and 9b. Most of the changes were minor. For more information on these corrections please contact us.
FORECAST HIGHLIGHTS
Global liquid fuels
* The August Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty related to the ongoing recovery from the COVID-19 pandemic. U.S. economic activity continues to rise after reaching multiyear lows in the second quarter of 2020 (2Q20). U.S. gross domestic product (GDP) declined by 3.5% in 2020 from 2019 levels. This STEO assumes U.S. GDP will grow by 6.6% in 2021 and by 5.0% in 2022. The U.S. macroeconomic assumptions in this outlook are based on forecasts by IHS Markit. Our forecast assumes continuing economic growth and increasing mobility. Any developments that would cause deviations from these assumptions would likely cause energy consumption and prices to deviate from our forecast.
* Brent crude oil spot prices averaged $75 per barrel (b) in July, up $2/b from June and up $25/b from the end of 2020. Brent prices have been rising this year as result of steady draws on global oil inventories, which averaged 1.8 million barrels per day (b/d) during the first half of 2021 (1H21) and remained at almost 1.4 million b/d in July. We expect Brent prices will remain near current levels for the remainder of 2021, averaging $72/b from August through November. However, in 2022, we expect that continuing growth in production from OPEC+ and accelerating growth in U.S. tight oil production—along with other supply growth—will outpace decelerating growth in global oil consumption and contribute to Brent prices declining to an average of $66/b in 2022.
* We estimate that 98.8 million b/d of petroleum and liquid fuels were consumed globally in July, an increase of 6.0 million b/d from July 2020 but 3.4 million b/d less than in July 2019. We forecast that global consumption of petroleum and liquid fuels will average 97.6 million b/d for all of 2021, which is a 5.3 million b/d increase from 2020. We forecast that global consumption of petroleum and liquid fuels will increase by 3.6 million b/d in 2022 to average 101.2 million b/d.
* U.S. gasoline consumption averaged 8.6 million b/d in 1H21, up from 8.3 million b/d in 2H20 but below the 9.3 million b/d in 2H19. Our latest estimates show that gasoline consumption in May through July was higher than we had previously expected. Growth in employment and increasing mobility have led to rising gasoline consumption so far in 2021. In this STEO, forecast U.S. gasoline consumption averages 8.8 million b/d in 2021, up from 8.0 million b/d in 2020. We expect the trend of rising employment and mobility to continue into next year, and as a result, we forecast gasoline consumption to average almost 9.0 million b/d in 2022. However, our assumption that a relatively high share of the workforce will continue working from home next year compared with before the pandemic keeps our forecast gasoline consumption below the 2019 level of 9.3 million b/d.
* U.S. regular gasoline retail prices averaged $3.14 per gallon (gal) in July, the highest monthly average price since October 2014. Recent gasoline price increases reflect rising crude oil prices and rising wholesale gasoline margins, amid relatively low gasoline inventories. We expect that prices will average $3.12/gal in August before falling to $2.82/gal, on average, in 4Q21. The expected drop in retail gasoline prices reflects our forecast that gasoline margins will decline from elevated levels, as is typical in the United States during the second half of the year.
* We forecast OPEC crude oil production will average 26.5 million b/d in 2021, up from 25.6 million b/d in 2020. OPEC crude oil production in the forecast rises from 25.0 million b/d in April to an average of 27.1 million b/d in 3Q21. Our expectation of rising OPEC production is primarily based on our assumption that OPEC will raise production through the end of 2021 in line with targets it announced on July 18. We expect OPEC crude oil production will rise to an average of 28.7 million b/d in 2022.
* EIA’s most recent monthly data show U.S. crude oil production was 11.2 million b/d in May. We expect production to be relatively flat through October before it starts rising in November and December and throughout 2022. Forecast U.S. crude oil production for 2022 averages 11.8 million b/d, up from 11.1 million b/d in 2021.
Natural Gas
* In July, the natural gas spot price at Henry Hub averaged $3.84 per million British thermal units (MMBtu), which is up from the June average of $3.26/MMBtu. We expect the Henry Hub spot price will average $3.71/MMBtu in 3Q21 and $3.42/MMBtu for all of 2021, which is up from the 2020 average of $2.03/MMBtu. Higher natural gas prices this year primarily reflect two factors: growth in liquefied natural gas (LNG) exports and rising domestic natural gas consumption for sectors other than electric power. In 2022, we expect the Henry Hub price will average $3.08/MMBtu amid rising U.S. natural gas production.
* We expect that U.S. consumption of natural gas will average 82.5 billion cubic feet per day (Bcf/d) in 2021, down 1.0% from 2020. U.S. natural gas consumption declines in the forecast, in part, because electric power generators switch to coal from natural gas as a result of rising natural gas prices. In 2021, we expect residential and commercial natural gas consumption combined will rise by 1.2 Bcf/d from 2020 and industrial consumption will rise by 0.2 Bcf/d from 2020. Rising natural gas consumption in sectors other than the electric power results from expanding economic activity and colder winter temperatures in 2021 compared with 2020. We expect U.S. natural gas consumption will average 83.8 Bcf/d in 2022.
* We estimate that U.S. natural gas inventories ended July 2021 at almost 2.8 trillion cubic feet (Tcf), which is 6% lower than the five-year (2016–20) average for this time of year. More natural gas was withdrawn from storage during the winter of 2020–21 than the previous five-year average, largely as a result of the colder-than-average February temperatures that constrained natural gas production while it increased consumption. We forecast that inventories will end the 2021 injection season (end of October) at 3.6 Tcf, which would be 4% below the five-year average.
* We expect dry natural gas production will average 92.9 Bcf/d in the United States during 2H21—up from 91.4 Bcf/d in 1H21—and then rise to 94.9 Bcf/d in 2022, driven by natural gas and crude oil prices, which we expect to remain at levels that will support enough drilling to sustain production growth.
Electricity, coal, renewables, and emissions
* We forecast that U.S. retail sales of electricity will increase by 2.7% in 2021 after falling by 3.9% in 2020. The largest forecast increase in electricity consumption occurs in the industrial sector, driven by rising levels of economic output. We forecast U.S. retail sales of electricity to the industrial sector will grow by 5.3% this year. Retail sales of electricity to the commercial sector also grow in the forecast, but they grow at the slightly slower pace of 2.2% in 2021 because some workers will continue working from home instead of in office buildings. We forecast U.S. residential electricity sales will grow by 1.5% in 2021 as a result of colder temperatures in 1Q21 compared with 1Q20 and because of hot temperatures in June.
* We expect the share of electric power generation produced by natural gas in the United States will average 36% in 2021 and 37% in 2022, down from 39% in 2020. The forecast share for natural gas as a generation fuel declines in response to our expectation of a higher delivered natural gas price for electricity generators, which we forecast will average $4.46/MMBtu in 2021 compared with an average of $2.39/MMBtu in 2020. As a result of the higher expected natural gas prices, the forecast share of generation from coal rises from 20% in 2020 to 23% this year but falls to 21% next year. New additions of solar and wind generating capacity are offset somewhat by reduced generation from hydropower this year, resulting in the forecast share of all renewables in U.S. generation to average 20% in 2021, about the same as last year, before rising to nearly 23% in 2022. The nuclear share of U.S. electricity generation declines from 21% in 2020 to 20% in 2021 and to 19% in 2022 as a result of retiring capacity at some nuclear power plants.
* We forecast that planned additions to U.S. wind and solar generating capacity in 2021 and 2022 will increase electricity generation from those sources. We estimate that the U.S. electric power sector added 14.7 gigawatts (GW) of new wind capacity in 2020. We expect 17.6 GW of new wind capacity will come online in 2021 and 6.3 GW in 2022. Utility-scale solar capacity rose by an estimated 10.6 GW in 2020. Our forecast for added utility-scale solar capacity is 16.2 GW in 2021 and 16.6 GW for 2022. We expect significant solar capacity additions in Texas during the forecast period. In addition, about 5 GW of small-scale solar capacity (systems less than 1 megawatt) will come online each year during 2021–22 in the STEO forecast.
* Coal production in our forecast totals 607 million short tons (MMst) in 2021, an increase of 13% over 2020. We expect electric sector consumption of coal to be 33 MMst greater than supply in 2021, contributing to significant inventory draws. In 2022, we expect coal production to decline by 7 MMst (1%).
* We expect coal consumption for electricity generation to grow by 75 MMst (17%) in 2021 as a result of relatively high natural gas prices that make coal more competitive for dispatch in the electric power sector. Forecast electric power sector demand for coal then falls by 47 MMst (9%) in 2022. We expect demand for coal for other uses to rise by 5 MMst (13%) in 2021 and by 3 MMst (7%) in 2022. This increase is mostly for coking coal, which is used in steelmaking.
* We expect coal exports to total 90 MMst in 2021, a 21 MMst (30%) increase from 2020. In 2022, forecast coal exports rise an additional 16 MMst to 106 MMst. High global steel prices are driving these increases in coal exports, and trade tensions between China and Australia continue to support U.S. thermal coal exports.
* We estimate that U.S. energy-related carbon dioxide (CO2) emissions decreased by 11% in 2020 as a result of less energy consumption related to reduced economic activity and responses to COVID-19. For 2021, we forecast energy-related CO2 emissions will increase about 7% from the 2020 level as economic activity increases and leads to rising energy use. We also expect energy-related CO2 emissions to rise in 2022 but by a slower rate, 1%. We forecast that after declining by 19% in 2020, coal-related CO2 emissions will rise by 17% in 2021 and then decrease by 7% in 2022. Short-term changes in energy-related CO2 can be affected by temperature. A recent STEO supplement examines these dynamics.
The 8/6/2021 “US Total Oil and Gas Rig Count”’ increased by 3 for an overall count of 491 rigs. The 8/6/2021 GOM Offshore Rig Count remained unchanged at 14 rigs.
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/WeeklyRigCountUpdate.pdf
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/ogj_rig_count.pdf
No BOEM news on if and when they plan to commence the bidding process for the GOM region 2021 Lease Sale 259. I am of the opinion Gulfslope’s Tau Prospect BOEM leases could become more enticing.
Mrs. Smith
Oil Prices Rose and Completed Fourth Consecutive Monthly Gain on Friday, by Bloomberg, Jill R. Shah|, Friday, July 30, 2021
Oil posted its fourth straight monthly gain as steady demand and tight supplies calmed concerns that a new wave of Covid-19 infections would cripple energy consumption.
Futures in New York ended the week 2.6% higher. While cases of the virus’s delta variant have surged in recent weeks, mobility and other data point to strong demand in key economies that traders are watching. India posted the biggest gain in driving activity after restrictions were rolled back.
”All the data right now is really positive,”said Rebecca Babin, senior energy trader at CIBC Private Wealth, US. “That’s what you’re seeing. We do have tight supplies right now, so it’s really hard for the commodity to pull back.”
Oil futures are closing out a volatile July that saw prices whipsawing as the pandemic threatened to derail the economic recovery. Crude supplies are expected to remain tight through the end of the year, supporting the recent rally.
”It’s going to mostly grind higher,” said John Kilduff, a partner at Again Capital, adding that he sees West Texas Intermediate prices at $80 a barrel in the near-term.
Prices:
West Texas Intermediate for September delivery rose 33 cents to settle at $73.95 a barrel on the New York Mercantile Exchange
Brent for September, which expires Friday, added 28 cents to end session at $76.33 on the ICE Futures Europe exchange
Brent for October rose 31 cents to $75.41
https://www.rigzone.com/news/wire/oil_prices_rose_and_completed_fourth_consecutive_monthly_gain_on_friday-30-jul-2021-166079-article/
7/30/2021 Total US Oil and Gas Rig Count down by 3 rigs for a total of 488 rigs from the week earlier.
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/ogj_rig_count.pdf
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/WeeklyRigCountUpdate.pdf
EDITED
U.S. Economic Activity Charts, Issued July 26, 2021, 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 July 2021:
https://www.dallasfed.org/institute/dgei
July 2021 World Economic Outlook Update:
https://www.imf.org/-/media/Files/Publications/WEO/2021/Update/July/English/text.ashx
https://www.imf.org/en/Publications/WEO/Issues/2021/07/27/world-economic-outlook-update-july-2021#
EIA Weekly Petroleum Status Report, July 28, 2021
https://www.eia.gov/petroleum/supply/weekly/pdf/highlights.pdf
HIGHLIGHTS
U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ending July 23, 2021 which was 132,000 barrels per day less than the previous week’s average. Refineries operated at 91.1% of their operable capacity last week. Gasoline production increased last week, averaging 9.8 million barrels per day. Distillate fuel production decreased last week, averaging 4.7 million barrels per day.
U.S. crude oil imports averaged 6.5 million barrels per day last week, decreased by 0.6 million barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.4 million barrels per day, 6.9% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 909,000 barrels per day, and distillate fuel imports averaged 188,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.1 million barrels from the previous week. At 435.6 million barrels, U.S. crude oil inventories are about 7% below the five year average for this time of year. Total motor gasoline inventories decreased by 2.3 million barrels last week and are about 0% 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 3.1 million barrels last week and are about 7% below the five year average for this time of year. Propane/propylene inventories increased by 1.9 million barrels last week and are about 14% below the five year average for this time of year. Total commercial petroleum inventories decreased by 6.5 million barrels last week.
Total products supplied over the last four-week period averaged 20.6 million barrels a day, up by 12.6% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels a day, up by 9.1% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels a day over the past four weeks, up by 12.6% from the same period last year. Jet fuel product supplied was up 39.4% compared with the same four-week period last year.
The West Texas Intermediate crude oil price was $72.24 per barrel on July 23, 2021, $0.48 above last week’s price and $31.01 more than a year ago. The spot price for conventional gasoline in the New York Harbor was $2.292 per gallon, $0.049 more than last week’s price and $1.047 above a year ago. The spot price for ultra-low sulfur diesel fuel in the New York Harbor was $2.133 per gallon, $0.031 above last week’s price and $0.871 over a year ago.
The national average retail regular gasoline price was $3.136 per gallon on July 26, 2021, $0.017 per gallon less than last week’s price but $0.961 over a year ago. The national average retail diesel fuel price was $3.342 per gallon, $0.002 below last week’s price but $0.915 over a year ago.
WTI $73.95/bbl July 31, 2021 10:00 CDT
https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 7/29/21 Close
Product Area Price Percent Change*
Crude Oil ($/barrel)
WTI 73.62 +1.7
Brent 76.30 +1.6
Louisiana Light 74.22 +1.7
https://www.eia.gov/todayinenergy/prices.php
You hit the nail on the head.
My take on this is exactly the way spec just asserted.
Mrs. Smith
Oil gains as demand recovery seen tightening supply, By Laila Kearney, July 22, 2021
10:43 AM CDT Last Updated an hour ago.
https://www.reuters.com/business/energy/oil-prices-keep-overnight-gains-demand-hopes-offset-us-stock-build-2021-07-22/
Summary
*Demand seen outstripping supply in second half of year
*U.S. crude inventories rise but still falling at Cushing - EIA
*Brent seen at mid to high-$70s for rest of year -Morgan Stanley
NEW YORK, July 22 (Reuters) - Oil prices inched up on Thursday, extending gains made in previous sessions on expectations of tighter supplies through2021 as economies recover from the coronavirus crisis.
Brent crude gained 50 cents to $72.73 a barrel by 11:10 a.m. EDT (1510 GMT), after rising 4.2% in the previous session. U.S. West Texas Intermediate (WTI) crude added 40 cents to $70.70 a barrel, after gaining 4.6% on Wednesday.
"Some soft spots have emerged in the oil demand recovery, but this is unlikely to change the outlook fundamentally," Morgan Stanley said in a note.
Members of the Organization of the Petroleum Exporting Countries and other producers including Russia, collectively known as OPEC+, agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand.
But as demand was still set to outstrip supply in the second half of the year, Morgan Stanley forecast that global benchmark Brentwill trade in the mid to high-$70s per barrel for the remainder of 2021.
"In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive," it said.
Crude inventories in the United States, the world's top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed.
Inventories at the Cushing, Oklahoma crude storage hub and delivery point for WTI, however, has plunged for six continuous weeks, and hit their lowest since January 2020 last week.
Supplies fell further by 1.3 million barrels to lowest level since early last year, theoretically offering support to the WTI curve," said Jim Ritterbusch of Ritterbusch and Associates.
Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel.
"Notwithstanding the tail risks, supply-demand dynamics point to a slow grind higher in prices over the next few months," Barclays said in a report.
WTI worming it’s way back up from earlier lows this week.
$71.45/bbl WTI August Contract up 1.64% this morning, July 22, 2021 @ 11:49 am CDT
https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 7/21/21 Close
Product Area Price Percent Change*
Crude Oil($/barrel)
WTI 70.26 +4.4
Brent 72.54 +3.6
Louisiana Light 70.76 +4.4
https://www.eia.gov/todayinenergy/prices.php
Mrs. Smith
API Monthly Statistical Report ‘MSR’ released today, 7/21/2021. API Statistics Department & Office of the Chief Economist
For Data and Chart Details By Section See Link Below:
https://www.api.org/-/media/Files/News/2021/07/Monthly_Statistical_Report_June_2021.pdf#page4
EXECUTIVE SUMMARY:
With urban re-openings and the onset of the summer driving season, U.S. petroleum demand rose for a fourth consecutive month and eclipsed twenty million barrels per day (mb/d) in June, according to API’s primary data. Domestic supply has not kept pace, and U.S. petroleum net imports grew despite stronger exports in June, which along with higher crude oil prices reinforced that the global economy and oil markets have remained solid.
Highlights:
• Total U.S. petroleum demand of 20.6 million barrels per day (mb/d) rose to its highest for any month since November 2019.
• A resumption in urban activity drove gasoline demand to 9.4 mb/d, within 3.5% of its June 2019 level.
• Refining and petrochemical demand for other oils – naphtha, gasoil, propane/propylene – of 5.7 mb/d set a
record for the month of June and was over 17% above its June 2019 level.
• Increased refining throughput (16.5 mb/d) led the highest capacity utilization rate 91.4% since Dec. 2019.
• U.S. crude oil production (11.2 mb/d) edged up but remained 1.6 mb/d below its Nov. 2019 record level.
• With demand increases that outpaced those of supply, the U.S. remained a petroleum net importer in June.
• Leading economic indicators remained strong and positive in June, including API’s Distillate Economic
IndicatorTM signaling continued industrial production gains (please see the link below for chart details.
https://www.api.org/-/media/Files/News/2021/07/Monthly_Statistical_Report_June_2021.pdf#page4
Demand
• U.S. petroleum demand (20.6 mb/d) neared top of the five-year range.
– Urban activity drove gasoline demand of 9.4 mb/d.
– Distillate demand remained relatively solid at 3.9 mb/d.
– Jet fuel deliveries rose for the fourth straight month.
– Marine shipping drove the highest residual fuel oil demand since Sep. 2020.
– Record June petrochemical demand for other oils.
Prices and Macroeconomy
• Gasoline responded to higher crude oil prices – highest for June since 2014.
• Leading indicators suggest broad industrial gains.
Supply
• U.S. crude oil production edged up, while natural gas and NGL production fell.
International Trade
• U.S. petroleum net imports persisted despite higher exports.
Industry Operations
• Refinery capacity utilization (91.4%) highest since Dec. 2019.
Inventory
• Lowest crude oil inventories since January 2020.
PETROLEUM FACTS AT A GLANCE – July 2021 RELEASE
https://www.api.org/-/media/Files/News/2021/07/Petroleum_Facts_at_a_Glance_June_2021.pdf
1. Total U.S. supply of crude oil, natural gas liquids and other liquids in June 2021: 17,518,000 b/d, up by 894,000 b/d compared with June 2020 (June 2020: 16,624,000 b/d) [API]
2. U.S. crude oil production for the month of June: 11,240,000 b/d (of which 410,000 b/d was Alaskan) (June 2020: 10,442,000 b/d). U.S. production of natural gas liquids in June 2021: 5,200,000 b/d (June 2020: 5,197,000 b/d). [API]
3. Total petroleum products delivered to the domestic market in June 2021: 20,599,000 b/d (June 2020: 17,435,000 b/d). [API]
4. Petroleum exports for the month of June: 8,848,000 b/d (June 2020: 7,692,000 b/d). [API]
5. U.S. petroleum trade balance contracted by 468,000 b/d in June 2021 net imports of 207,000 b/d (June 2020: 675,000 b/d net imports). [API]
OPEC+ Boost Oil Output as Demand Roars Back, By Benoit Faucon and Summer Said, Updated July 18, 2021 4:40 pm ET
https://www.wsj.com/articles/opec-countries-plan-to-meet-to-push-oil-output-increase-11626604843
OPEC and its Russia-led oil-producing allies agreed to unleash millions of barrels of bottled-up crude over the next two years, committing to restore all the cuts they made at the start of the Covid-19 pandemic as many economies pick up and crude demand recovers.
Underscoring the uncertain speed of a full economic recovery and a return of pre-pandemic oil demand, the group chose to move gradually, agreeing to modest, monthly installments of new oil through the latter end of 2022. Oil prices have eased recently in anticipation of a deal, but analysts said the gradual nature of the output boost could continue to pressure prices.
The prospect of an OPEC deal had already led to a drop in prices, which have recovered strongly this year. Brent, the international benchmark, and West Texas Intermediate have both fallen about 5% in recent days, as hope grew for an OPEC deal. Brent closed above $73 a barrel, and WTI finished above $71 a barrel Friday, both off recent, multiyear highs.
The move also demonstrates the world’s push-pull over its reliance on fossils fuels. Europe and the U.S. have pushed ambitious plans to wean themselves from carbon-emitting fuels like oil. But the world is still largely dependent on plentiful supplies of such fuels, including oil.
The Biden administration, while pushing for an energy transition to greener fuels, reached out to Saudi Arabia and the United Arab Emirates when those two OPEC members clashed over terms of a deal. U.S. gasoline prices have risen this summer, a consequence of higher oil prices.
The output hike will “please the White House, which has worried … about the impact of higher gasoline prices on U.S. consumers,” said Helima Croft, the chief commodities strategist at Canadian broker RBC.
Sunday’s oil deal calls for the Organization of the Petroleum Exporting Countries and a Russia-led group of big producers to raise production by 400,000 barrels a day each month through the end of 2022. The deal seeks to unwind all the cuts the two groups, collectively called OPEC+, agreed to make at the start of the pandemic.
The deal marks a turning point for the oil industry, which went into a tailspin in the early months of the pandemic. Economies around the world went into hibernation, and oil demand sank. At one point, oil markets were so chaotic that futures for U.S. benchmark crude briefly fell below zero. Oil-storage facilities were brimming full, and producers, trader and buyers were storing oil at sea because they had no need for it.
Big producers retrenched, cutting spending and jobs and seeking to sell assets to pare debt.
By contrast more recently, oil prices have been rallying most of the year on returning demand, particularly in rich countries. Oil companies have returned to profitability, and shares have risen sharply.
But the demand outlook remains uncertain. Much of the developing world, where demand growth for oil had been strongest pre-pandemic, is still fighting surging Covid-19 cases. Powerhouses such as India and Indonesia have been ravished by the so-called Delta variant of Covid-19. Even in China, which appeared to be recovering strongly from pandemic-inspired economic shutdowns, economic data has been uneven.
In the developed world, meanwhile, soaring demand has triggered price increases, shortages and supply bottlenecks for all sorts of goods. Analysts are forecasting stronger oil demand in the short term from economies whose pre-pandemic thirst for crude was largely flat.
Still, the Delta variant has boosted infection in the U.S. and Europe, too, casting a cloud of uncertainty over the pace of recovery in those places. Governments are betting their vaccination drives will keep a lid on hospitalizations and deaths, while allowing the continuance of new freedoms, such as open restaurants, unrestricted travel and large gatherings.
OPEC expects oil demand in industrialized nations to increase by 2.7 million barrels a day in 2021, up 6.3%. More than half of that growth will come from the U.S., at 1.5 million barrels a day, it said. In its first 2022 forecasts for the global oil market, OPEC said last week it expected the world’s appetite for crude to rise by 3.3 million barrels a day to average 99.9 million barrels a day next year. That is about the level of demand pre-pandemic.
In its deal Sunday, OPEC+ committed to meeting most of that with oil it had previously taken off the table. The only other producer capable of quickly ramping up output is the U.S., but the smaller shale-oil players there have been mostly on the sidelines amid this year’s dramatic recovery in oil prices. They have been able to raise money from investors, but have plowed that into paying down debt.
The deal also could re-establish OPEC+’s credibility in the markets, signaling a more disciplined approach. Through much of the year, the group has swung widely between optimism and pessimism about demand growth. Saudi Arabia has tended to be more cautious. Russia, by contrast, has sought to boost output. More recently, the public spat over production levels between Saudi Arabia and the U.A.E. delayed consensus and threatened a more serious splintering of the group. In such a scenario, members could have simply opened up their spigots, flooding markets.
The deal is “good for consumers in the short term,” said Robin Mills, chief executive of Dubai-based consulting firm Qamar Energy, though he and other analysts expect price pressure to remain as demand builds. “The market will be tight this summer,” said Giovanni Staunovo, a commodity analyst at Swiss bank UBS.
The group said it would reassess market conditions in December. The deal goes into effect next month.
Early last year, OPEC+ slashed 9.7 million barrels a day of its collective output, equivalent to about 10% of 2019 demand. It has restored about 4 million barrels of that.
The deal is broadly in line with one struck earlier this month. Final agreement had been held up for over two weeks after the U.A.E. asked for its production quota inside the group to be reassessed. It was eager to pump more crude than its allotment, after investing heavily in its oil fields.
Saudi Arabia, OPEC’s de facto leader, reached a compromise with the U.A.E. last week, agreeing to eventually boost that quota.
On Sunday, the group also decided to boost other members’ baselines, the estimate of the maximum amount of oil each country is capable of producing. The adjustments go into effect in May 2022. Those technical adjustments would also boost affected countries’ real output since that is based on the baselines.
OPEC said the U.A.E.’s baseline would go up by about 332,000 barrels a day. Saudi Arabia and Russia will each get their baseline lifted by 500,000 barrels a day. Overall, the group’s estimated production capacity is being upgraded by 1.63 million barrels a day.
The compromise between Saudi Arabia and the U.A.E. patched up for now the clash between two of OPEC’s closest traditional allies. While Saudi Arabia is far and away the bigger producer and regional power, the U.A.E. is one of just a few OPEC members with so-called spare capacity—barrels it can turn on and off quickly.
19th OPEC and non-OPEC Ministerial Meeting concludes.
The 19th OPEC and non-OPEC Ministerial Meeting (ONOMM), held via videoconference, concluded on Sunday 18 July 2021.
https://www.opec.org/opec_web/en/press_room/6512.htm
The Meeting noted the ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement and OECD stocks falling, as the economic recovery continued in most parts of the world with the help of accelerating vaccination programmes.
The Meeting welcomed the positive performance of Participating Countries in the Declaration of Cooperation (DoC). Overall conformity to the production adjustments was 113% in June (including Mexico), reinforcing the trend of high conformity by Participating Countries.
In view of current oil market fundamentals and the consensus on its outlook, the Meeting resolved to:
Reaffirm the Framework of the Declaration of Cooperation, signed on 10 December 2016 and further endorsed in subsequent meetings, including on 12 April 2020.
Extend the decision of the 10th OPEC and non-OPEC Ministerial Meeting (April 2020) until the 31st of December 2022.
Adjust upward their overall production by 0.4 mb/d on a monthly basis starting August 2021until phasing out the 5.8 mb/d production adjustment, and in December 2021 assess market developments and Participating Countries’ performance.
Continue to adhere to the mechanism to hold monthly OPEC and non-OPEC Ministerial Meetings for the entire duration of the Declaration of Cooperation, to assess market conditions and decide on production level adjustments for the following month, endeavoring to end production adjustments by the end of September 2022, subject to market conditions.
Adjust, effective 1st of May 2022, the baseline for the calculations of the production adjustments according to the attached table (table 1).
https://www.opec.org/opec_web/static_files_project/media/downloads/Table%20-%20Reference%20production.pdf
Reiterate the critical importance of adhering to full conformity and taking advantage of the extension of the compensation period until the end of September 2021. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting.
The meeting decided to hold the 20th OPEC and non-OPEC Ministerial Meeting on 1 September 2021.
OPEC Monthly Oil Market Report, “MOMR” July 15, 2021
https://players.brightcove.net/34306109001/default_default/index.html?videoId=6263677374001
https://www.opec.org/opec_web/en/publications/338.htm
OIL MARKET HIGHLIGHTS
Crude Oil Price Movements
Crude oil spot prices rose firmly in June, extending previous monthly gains, driven by a rally in futures markets, as well as a strengthening global physical crude market, amid higher crude demand from refiners. The OPEC Reference Basket (ORB) increased for the second-consecutive month in June, reaching its highest monthly average since October 2018. The ORB value rose $4.98 m-o-m, or 7.4%, to settle at an average of $71.89/b. Year-to-date (y-t-d), the ORB averaged $63.85/b, representing a gain of $24.64, or 62.9%, compared to the same month last year. In June, investors turned increasingly optimistic about the outlook for the oil demand recovery amid expectations for a tighter global oil market in 2H21. The ICE Brent front month rose $5.10 m-o-m in June, or 7.5%, to average $73.41/b, and NYMEX WTI increased $6.20, or 9.5%, m-o-m to average $71.35/b. Consequently, the ICE Brent and NYMEX WTI spread narrowed by $1.10 m-o-m to average $2.06/b in June, its lowest level since October 2020. The backwardation structure of all three major oil benchmarks strengthened in June on a tightening outlook for oil supply and demand fundamentals in the coming months. Hedge funds and other money managers boosted bullish positions related to crude in June, particularly in WTI, as speculators focus on expectations for rising oil prices.
World Economy
The global economic growth forecast for 2021 remains unchanged at 5.5%. In an initial assessment, global economic growth for 2022 is forecast at 4.1%. However, future global growth continues to be impacted by uncertainties, including the spread of COVID-19 variants and the pace of the global vaccine rollout. In addition, sovereign debt levels in many regions, together with inflationary pressures and central bank responses, remain key factors that require close monitoring. Nevertheless, upside potential could materialize as ongoing containment COVID-19 measures in combination with additional fiscal and monetary stimulus could turn out to be more effective than envisaged, leading to further gains in consumption and investments. US economic growth in 2021 remains at 6.4%, followed by growth of 3.6% in 2022. The Euro-zone economic growth in 2021 remains at 4.1%, followed by growth of 3.0% in 2022. Similarly, Japan’s economic growth forecast remains at 2.8% for 2021, followed by growth of 2.0% in 2022. After an unchanged growth forecast of 8.5% in 2021, China’s economic growth forecast for 2022 stands at 6.3%. India’s 2021 growth forecast remains at 9.5%, followed by growth of 6.8% in 2022. Brazil’s growth forecast for 2021 was revised up to 3.2%, followed by growth of 2.5% in 2022. Russia’s forecast for 2021 remains at 3.0%, followed by growth of 2.3% in 2022.
World Oil Demand
World oil demand growth in 2021 is forecast at 6.0 mb/d, unchanged from last month’s assessment, although there have been some regional revisions. Total oil demand is projected to average 96.6 mb/d. The 1Q21 was revised lower, amid slower than anticipated demand in the main OECD consuming countries. This was counterbalanced by better-than-expected data from OECD Americas in 2Q21, which is now projected to last through the 3Q21. Solid expectations exist for global economic growth in 2022. These include improved containment of COVID-19, particularly in emerging and developing countries, which are forecast to spur oil demand to reach pre-pandemic levels in 2022. World oil demand is anticipated to rise by 3.3 mb/d y-o-y in 2022, while total world oil demand is projected to average 99.86 mb/d, with the 100 mb/d mark exceeded in 2H22. OECD oil demand is anticipated to increase by 1.5 mb/d, as OECD Americas is expected to rise firmly with US oil demand only marginally below 2019 levels, mainly due to lagging transportation fuel demand. Non-OECD oil demand is projected to show an increase of 1.8 mb/d, with gains in China and India exceeding pre-pandemic levels, supported by a respectable recovery in transportation fuels and firm industrial fuel demand, including petrochemical feedstock.
World Oil Supply
Non-OPEC liquids supply in 2021 is revised down by 0.03 mb/d, despite upward revisions to the US and Canada. Growth is now at 0.81 mb/d for an average of 63.8 mb/d. The preliminary US liquids production recovery in 2Q21 indicates an increase of 1 mb/d, q-o-q. The main drivers for 2021 supply growth are expected to be Canada, China, Norway, Brazil and Guyana, with the US now expected to see y-o-y growth of 0.06 mb/d. The initial forecast for 2022 sees non-OPEC liquids supply growing by 2.1 mb/d, with a 1.1 mb/d expansion in in the OECD, 0.8 mb/d growth in the non-OECD and a 0.1 mb/d recovery in processing gains. At the same time, uncertainty remains high regarding financial and operational aspects of US production. OPEC NGLs are forecast to grow by 0.1 mb/d y-o-y in 2021 and 2022 to average 5.2 mb/d and 5.3 mb/d, respectively. OPEC crude oil production in June increased m-o-m by 0.59 mb/d, to average 26.03 mb/d, according to available secondary sources.
Product Markets and Refining Operations
Refinery margins in all main trading hubs declined in June as refineries ramped up processing rates following peak spring refinery maintenance season, which led to stronger product availability. This led to a longer overall product balance, as product output outpaced fuel consumption recovery, weighing on product crack spreads. The ongoing vaccination rollout and optimism following the relaxation of lockdown measures in many countries, leading to expectations of higher fuel consumption levels going forward, contributed to the rise in refinery runs, which are expected to remain strong in the near term.
Tanker Market
Dirty tanker rates remained at depressed levels in June as ample tonnage availability and limited tanker demand continued to weigh on the market. The search for better rates have even encouraged the use of new built VLCCs to carry clean products, eroding clean tanker rates. New deliveries, minimal scrapping and weak tanker demand point to a continued sluggish tanker market, possibly into next year.
Crude and Refined Products Trade
The US provided key seasonal support for global trade flows in June, according to preliminary data. US crude imports rose 0.7 mb/d m-o-m, or more than 11%, to average 6.7 mb/d in June, the highest since December 2019. US crude exports also rose sharply m-o-m in June, jumping 0.8 mb/d or almost 30%, to average 3.6 mb/d, the second-highest on record. China’s crude oil imports averaged 9.7 mb/d in May, representing a further decline of 0.2 mb/d or 2% m-o-m and a cumulative decline of 2.1 mb/d or 18% over the last two months. Preliminary figures for June show the country’s crude imports ticking up, but remaining below 10 mb/d. India’s crude imports fell to a seven-month low in May, as the peak of the second COVID-19 wave arrived in the middle of that the month. With reduced COVID-19 infections at the end of June, refiners in India have begun began to slowly lift run rates which could strengthen crude inflows in July. Meanwhile, Japan’s crude imports fell back in May from the strong levels seen the month before, averaging 2.4 mb/d, as renewed lockdown measures undermined expectations for product demand. The start of the 2021 Tokyo Olympics in July should provide some boost to crude and product imports, although uncertainty regarding COVID-19 measures are clouding product needs.
Commercial Stock Movements
Preliminary May data sees total OECD commercial oil stocks up by 8.3 mb m-o-m. At 2,934 mb, inventories were 276.9 mb lower than the same month last year; 86.6 mb lower than the latest five-year average; and 21.7 mb below the 2015-2019 average. Within components, crude and product stocks were up by 1.1 mb and 7.2 mb, respectively. At 1,466 mb, OECD crude stocks stood 60.8 mb below the latest five-year average and 32.5 mb below the 2015-2019 average. At 1,468 mb, OECD product stocks were 25.9 mb below the latest five-year average, but 10.8 mb above the 2015-2019 average. In terms of days of forward cover, OECD commercial stocks fell 0.8 days m-o-m in May to stand at 64.2 days. This is 13.4 days below the May 2020 level, 0.8 days below the latest five-year average, but 2.4 days above the 2015-2019 average.
Balance of Supply and Demand
Demand for OPEC crude in 2021 remains unchanged from the previous report at 27.7 mb/d, around 5.0 mb/d higher than in 2020.Based on the initial forecasts for world oil demand and non-OPEC supply in 2022, demand for OPEC crude is forecast at 28.7 mb/d, some 1.1 mb/d higher than the 2021 level.
Over the past 6 1/2+ years, the highest number of drilling permits issued for “new wells” in shallow water was 25 in 2019. As of July 16th 2021, there have been 18 drilling permits issued already for “new wells”. This does not take into account revised new well, sidetrack, revised sidetrack, bypass or revised bypass.
I anticipate things to continue rolling along for “new wells” in 2021, out performing 2019. The Tau 2 twin well is classified as a “new well” with the BOEM and BSEE.
Source: BSEE Data Center
Mrs. Smith
19th OPEC, non-OPEC Meeting to reconvene on Sunday, 7/18/2021 No 20/2021
Vienna, Austria
17 Jul 2021
The 19th OPEC and non-OPEC Ministerial Meeting of the Declaration of Cooperation (DoC) will hold on Sunday, 18 July 2021, at 12:00 (CEST) via videoconference.
https://www.opec.org/opec_web/en/press_room/6511.htm
Mrs. Smith
7/16/2021 GOM Offshore Rig Count report holds steady at 17 rigs, and is up 42% from one year ago. The Total US Oil and Gas Rig Count reflects 484 rigs an increase of 5.
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/WeeklyRigCountUpdate.pdf
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/ogj_rig_count.pdf
https://www.westwoodenergy.com/news/infographics/weekly-global-offshore-rig-counts
Mrs. Smith
7/9/2021 U.S. commercial crude oil inventories decreased by 7.9 million barrels from the previous week. At 437.6 million barrels (excluding SPR).
Summary of Weekly Petroleum Data for the week ending July 9, 2021, source: EIA.gov
https://ir.eia.gov/wpsr/wpsrsummary.pdf
https://ir.eia.gov/wpsr/overview.pdf
https://www.eia.gov/petroleum/supply/weekly/
U.S. crude oil refinery inputs averaged 16.1 million barrels per day during the week ending July 9, 2021 which was 22,000 barrels per day less than the previous week’s average. Refineries operated at 91.8% of their operable capacity last week. Gasoline production decreased last week, averaging 9.9 million barrels per day. Distillate fuel production decreased last week, averaging 4.9 million barrels per day.
U.S. crude oil imports averaged 6.2 million barrels per day last week, up by 347,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.4 million barrels per day, 0.1% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.0 million barrels per day, and distillate fuel imports averaged 77,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.9 million barrels from the previous week. At 437.6 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 1.0 million barrels last week and are about 1% 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 3.7 million barrels last week and are about 4% below the five year average for this time of year. Propane/propylene inventories increased by 1.6 million barrels last week and are about 18% below the five year average for this time of year. Total commercial petroleum inventories increased by 2.5 million barrels last week.
Total products supplied over the last four-week period averaged 20.6 million barrels a day, up by 14.1% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels a day, up by 9.7% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels a day over the past four weeks, up by 8.4% from the same period last year. Jet fuel product supplied was up 65.9% compared with the same four-week period last year.
WTI $74.01/bbl August Contract as of 7/14/2021 11:01 am CDT
https://oilprice.com/oil-price-charts/45
Wholesale Spot Petroleum Prices, 7/13/21 Close
Product Area Price Percent Change*
Crude Oil($/barrel)
WTI 75.24 +1.4
Brent 77.50 +1.0
Louisiana Light 75.89 +1.4
https://www.eia.gov/todayinenergy/prices.php
Oil Stabilizes After Saudi-UAE Compromise Removes Major Uncertainty, By Tsvetana Paraskova - Jul 14, 2021, 10:05 AM CDT
https://oilprice.com/Energy/Oil-Prices/Oil-Stabilizes-After-Saudi-UAE-Compromise-Removes-Major-Uncertainty.html
Oil prices steadied on Wednesday morning before the EIA inventory report after a reported compromise between Saudi Arabia and the UAE over baseline production levels removed a major uncertainty that was hanging over the market.
As of 9:58 a.m. EDT on Wednesday, WTI Crude was down 0.32 percent at $74.93 and Brent Crude prices were down 0.17 percent at $76.29.
Earlier in the day, oil prices were deeper in the red, as market participants started to fret about what low Chinese imports would mean for global oil demand.
China’s crude oil imports fell to some 9.77 million barrels daily in June, down 2 percent on May and the lowest monthly level since the start of the year, according to customs data cited by Reuters on Tuesday.
Over the first half of the year, China imported 260.66 million tons of crude, down 3 percent on the first half of 2020. The first-half figure was boosted by increased imports by independent refiners, commonly called teapots.
Since the first quarter, however, Beijing has begun cracking down on the teapots, as production of fuels both at independent refiners and state-owned majors was rising faster than demand, undermining refining margins and creating a glut.
Oil prices fell on Tuesday after the Chinese oil import data, and continued sliding even after the American Petroleum Institute (API) on Tuesday reported a draw in crude oil inventories of 4.079 million barrels for the week ending July 9, bringing the total 2021 crude draw so far to 50.01 million barrels.
Wednesday’s trade also started in the red, but the Saudi-UAE compromise somewhat calmed the market. The compromise would mean that the alliance could move to add more oil supply from August through December this year to meet the rebound in global oil demand and prevent a super-tight market and very high oil prices that could slow economic and oil demand growth. The compromise also removes a key uncertainty hanging over the market about the future of the OPEC+ pact and the possibility of a new oil price war.
By Tsvetana Paraskova for Oilprice.com
Oil prices hover near two-year high after OPEC+ resolves standoff, By GRANT SMITH AND SHARON CHO on 7/14/2021, Worldoil.com
https://www.worldoil.com/news/2021/7/14/oil-prices-hover-near-two-year-high-after-opecplus-resolves-standoff
Bloomberg) --Oil fluctuated as Saudi Arabia and the United Arab Emirates were said to resolve the standoff that has prevented OPEC+ from satisfying a growing clamor for extra barrels.
Futures flickered near $75 a barrel in New York, having settled on Tuesday at the highest close since late 2018. The OPEC+ coalition will decide on a new meeting date soon, after the UAE successfully secured a higher production baseline, a delegate said. The point of contention had scuppered last week’s OPEC+ meeting and threatened the unity of the entire alliance.
Resolving the breach should, in theory, allow the Organization of Petroleum Exporting Countries and its partners to proceed with plans for reviving output still shuttered since the pandemic. The 23-nation block is aiming to restore supplies in installments of 400,000 barrels a day through to late 2022.
The market has shown it’s thirsty for additional supplies. American crude inventories declined substantially again last week, according to an industry report published ahead of government data due later on Wednesday. The nation’s oil demand has soared to new heights, with gasoline and diesel returning to pre-pandemic levels.
Oil has rallied more than 50% this year as the vaccine rollout lifts demand in major economies such as the U.S. and China, and fosters a recovery in Europe. Futures prices are showing a premium on nearer-term contracts, known as backwardation, which usually indicates tightness.
The International Energy Agency warned on Tuesday that the market will tighten significantly if the OPEC+ alliance doesn’t resolve the standoff.
Yet the global outlook faces a growing threat from the spread of the coronavirus variant. Indonesia posted a record number of positive cases, while Sydney extended a lockdown.
“Trouble is brewing for the oil market,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. “Fears are mounting that rising Covid-19 Delta cases could delay a full economic recovery. This, in turn, poses a significant threat to oil demand growth in the near-to-medium-term.”
Prices:
West Texas Intermediate for August was 47 cents lower at $74.78 a barrel on the New York Mercantile Exchange at 12:43 p.m. in London.
It settled on Tuesday at $75.25, the highest since Oct. 3, 2018
Brent for September settlement fell 27 cents to $76.22 on the ICE Futures Europe exchange after climbing 1.8% on Tuesday.
The prompt timespread for Brent was 76 cents a barrel in backwardation, compared with 88 cents a week earlier.
The American Petroleum Institute said crude inventories slid by more than 4 million barrels last week, according to people familiar with the data. The Energy Information Administration is expected to report a similar reduction later on Wednesday, according to a Bloomberg survey.
That would be an eighth straight weekly draw, the longest run of declines since January 2018. A surge in petroleum use for products such as plastic, asphalt, lubricants and other industrial needs is helping to propel the recovery.
You are correct on both counts. College recruits have a choice, and Gulfslope will have a drilling program in my opinion.
Mrs. Smith
I am going out on a limb and state, Gulfslope will have close to 2 million reflected in Cash on their SEC 3rd Quarter 10-Q August 16th filing.
The cautionary wording on their Forward Looking Statements is important, but (GAAP/FASB) routine. It was included in their filings when they SPUD and drilled the Canoe and Tau prospects.
My opinion.
Mrs. Smith
When Gulfslope SPUD the Tau the GOM rig count was between 18 and 20 then it went up to a high of 28 rigs. Currently it stands at 17 rigs.
“High shooter for 3 years and Captain for 2 on the rifle team”. spec, is there a hidden message for me, smith199?
“We were tough and smart”, great minds!
Mrs. Smith
spec,
Both Warm and Cold “stacked”? I thought there were more GOM rigs available.
“Then” or “Now” best reflects YOU in this video? ME? You would be correct. GSPE TOUGH!!!!
https://www.google.com/amp/s/amp.dailycaller.com/2021/07/12/college-football-tiktok-softness-video
Jim Weber
@JimMWeber
College football players then
vs.
College football players now
Is that a newly drafted Texas A & M player? Kiddos who twerk you to death vs displaying signs of strength and power. In the end, they both get the job done?
Curious to see how Matt Damon portrays that “Roughneck” in the 2021 film ‘Stillwater’. Twerking? HOLD “super tight” spec? lol. By the way, I have been holding my shares tight too.
Take care my friends,
Mrs. Smith
The 7/9/2019 GOM Offshore Rig Count Update report increased 21.5% from the previous week and is currently showing 17 rigs. The GOM rig count increase was neck and neck with the Basins. The Total US Oil and Gas Rig Count reflects 479 rigs an increase of 4 rigs, 2 of which were for GOM Federal waters. All of Gulfslope’s prospects are in GOM Louisiana offshore waters.
Expecting the "GOM" Offshore Rig Count to at least stabilize if not rise throughout the rest of 2021, as a result of invigorated WTI prices. Reminder, changes in the oil rig count have historically resulted from changes in oil prices with a lag-time of up to a calendar quarter.
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/WeeklyRigCountUpdate.pdf
http://www.dnr.louisiana.gov/assets/TAD/data/drill_weekly/ogj_rig_count.pdf
Mrs. Smith
Edited
WTI up almost 2.5% this morning @ $74.62/bbl.
https://oilprice.com/oil-price-charts/45
Mrs. Smith
What you posted is 100% accurate.
Yes, there have been some astronomical GSPE bargains in the past too.
In agreement with this GSPE old timer.
Take care,
Mrs. Smith