Petroleum July News

After Wednesday brought the largest single-day crude price drop since August 2015, markets have stabilized, with prices yesterday ending just slightly above Wednesday’s close. This morning, prices continue to show meager gains. WTI crude oil is currently trading at $70.44, a gain of 11 cents.
Fuel prices are also trending slightly higher after their losses. Gasoline prices rose a penny yesterday, while diesel picked up two cents. This morning, gasoline prices are $2.0752, a gain of 0.4 cents over yesterday’s close. Diesel prices are $2.1164, representing a loss of 0.7 cents.
Market direction is lacking this morning as little news has surfaced since Wednesday’s sell-off. Bloomberg reported that OPEC deal compliance has fallen to 126%, down from 160%, thanks to increased production from Saudi Arabia. The IEA released their monthly energy report basically telling markets what they already expect – that demand has been strong but is expected to decline in the latter half of the year, and global supply has been rising. In particular, the report notes that overall markets are balanced or slightly oversupplied (implying lower prices), but the constant threat of outages makes price volatility certain.
Syncrude Returns – Canada’s Syncrude operation will bring 150 kbpd back to the market in July, while full operations of the 360 kbpd project will resume by September. The news is less optimistic than markets had hoped for, but the timeline clarity has still helped alleviate fears of shortages in Cushing, OK inventories.
Massive crude inventory draw – while every other factor has created downward pressure, this one should not slip by unnoticed. Crude inventories fell 12.6 million barrels, with draws in every region of the country. Of course, most of the draw was attributable to declining imports, which for the week were 11 million barrels lower than the week previous. The draw brings America’s total crude days of supply to just 22.9 days, the lowest level since January 2015.
Oil prices ended the mixed Thursday after wavering between gains and losses on Varying supply signals. Global prices rebounded after a steep decline on Wednesday, when crude tumbled amid concern over resurgent Libyan supply and the U.S.-China trade dispute. Brent sank 6.9% that day, its biggest drop since February 2016, while WTI plunged 5% for its worst retreat in more than a year. Libya’s state-run National Oil Corp. lifted the force majeure on eastern oil ports that had kept the country’s crude off global markets amid continued civil war. Analysts estimated that those ports could contribute approximately 700,000 barrels of oil a day to the global market. However, prices stabilized as the International Energy Agency warned that recent outages could stretch the world’s spare-capacity cushion and hinted that it would be ready to access emergency supplies if needed. According to the U.S. EIA, crude inventories fell by 12.63M/bbls in the week ended July 6, exceeding analyst estimates. The global oil-market supply backdrop also remains constructive, analysts said, with crude prices trading near more-than-three-year highs earlier this week. While the Libyan supply squeeze had been among the largest price drivers, supply problems in Canada, strikes in Norway and expectations of dropping exports from Venezuela and sanction-hit Iran also have boosted prices in recent weeks.
Oil prices are showing modest gains this morning, but are still set for a second straight week of declines on Friday after Libyan ports reopened and on the view that Iran might still export some crude despite U.S. sanctions. RBOB gasoline is leading the way higher this morning up +2.5 cents, while crude is up only about $0.50/bbl and heating oil +0.75 cents/gal.
WTI futures were able to briefly breach $75 at the beginning of July due to Libyan and Venezuelan supply disruptions and fears the U.S. would press all buyers of Iranian oil to cut imports to zero from November. But prices weakened in recent days as OPEC member Libya reopened its ports in the east and U.S. Secretary of State Mike Pompeo said Washington would consider granting waivers to some of Iran’s crude buyers.
Prices also slid amid broader market fears that a U.S.-China trade dispute could hit global economic growth. The U.S. EIA has released a report outlining how China is a key destination for energy exports. In 2017, China received 20% of all U.S. crude exports, second only to Canada, which received 29%, according to the report. China received a larger percentage of crude oil exports in 2017 than the next two importers — the United Kingdom at 9% and Netherlands at 8% — combined. China’s thirst for oil is only growing, averaging 330,000 b/d this year. In February, China received more U.S. crude oil than any other destination, the report said. Most of these exports originated from the Gulf Coast region
Baker Hughes reported an increase to the number of active oil and gas rigs in the United States on Friday. Oil and gas rigs increased by 2 rigs, according to the report, with the number of active oil rigs staying at 863 for the week, while the number of gas rigs increased by 2, hitting 189.
The oil and gas rig count now stands at 1,054—up 102 from this time last year, with the number of oil accounting for 98 of that 102.
Canada gained 15 oil and gas rigs for the week, 13 of which were oil rigs. Canada’s oil and gas rig count is now up just 6 year over year. Oil rigs are up by 33 year over year in Canada, while the number of gas rigs are down by 27.