Oil prices boosted by fuel change | Rigzone
(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)
In this week’s edition of the successes and failures of the oil and gas industry, regular market watchers from Rigzone looked at the development of commodity prices, the results of the last OPEC + meeting, ESG trends and more. Read on to find out what they had to say.
Rigzone: What were the market expectations that actually happened over the past week – and what expectations didn’t happen?
Tom Seng, Director – School of Energy Economics, Policy and Commerce, Collins College of Business, University of Tulsa: WTI and Brent both traded their multi-year highs set this week, but are still heading for a week-to-week gain. The benchmark US crude index hit a seven-year high this week while approaching $ 80 but falling just below. Meanwhile, Brent managed to hit $ 83.50, a three-year high. All expectations that the OPEC + group would increase its production quotas in response to global shortages and rising prices were quelled after their meeting on Monday. The cartel and his friends are maintaining their planned monthly increases of 400,000 barrels per day, which will eventually restore 3.2 million barrels per day from previous cuts, despite calls from the US government to increase production. Global oil prices are also being boosted by the change in fuel, as the scarcity of natural gas pushes prices up to $ 30 / MMBtu, forcing industrial and power producers to turn to refined products. There were some key technical indicators that served to limit the rally this week as prices may have risen “too high, too fast” and some retracement was inevitable. Russian President Putin’s announcement that they could supplement Europe’s energy needs only caused crude prices to fall only temporarily and the rally continued on Thursday. The possible release of oil from the US Strategic Petroleum Reserve mentioned by the US Secretary of Energy will not happen at this time.
This week’s EIA Weekly Petroleum Status Report pushed prices down on Wednesday as the government reported that commercial oil inventories rose 2.35 million barrels to 421 million barrels, down 7% from the average for that time of year. The API reported that stocks rose 950,000 barrels while WSJ analysts asked that stocks remain stable on average. Refinery utilization increased to 89.6% from 88.1% the previous week. Total motor gasoline inventories rose 3.25 million barrels and are now just 1% below the average of 5 for this time of year. Distillate inventories increased by 400,000 barrels and are now 11% below the five-year average. Crude Oil Stocks at Cushing’s Key, OK. Hub grew from 1.55 million barrels to 35.5 million barrels, or about 47% of its capacity. 920,000 barrels have been withdrawn from the United States Strategic Petroleum Reserve. US oil production has increased from 200,000 barrels per day to 11.3 million barrels per day as Gulf of Mexico production returns. Around the same time last year, US crude production was 11 million barrels per day.
US retail gasoline also hit a seven-year high, hitting $ 3.22 / gal, while November futures reached a seven-year high of $ 2.37 / gal. Major U.S. stock market indicators were on a roller coaster this week as the threat of government default loomed over the Democratic / Republican status quo on the debt ceiling. The Dow, S&P and NASDAQ fell earlier in the week only to take advantage of news that the GOP would jeopardize a short-term extension of the debt ceiling. This news, along with a weaker US dollar, helped crude regain inventory report losses.
Jon Donnel, Managing Director, B. Riley Advisory Services: The OPEC + meeting this week allowed the group to maintain its previous plan to add 400,000 barrels of production per day to the market in November, sending crude prices to new highs with WTI approaching $ 80. a barrel before the relatively bearish US inventory report served to temper commodities markets midweek. OPEC + has noted caution about Covid’s potential to negatively impact demand as winter approaches, but current prices suggest this is more than offset by the increasing likelihood of switching fuel for electricity and heat as natural gas shortages and supply chain problems persist in Europe and Asia.
Tom McNulty, Houston-based Director and Head of Energy Practice at Valuescope, Inc: It appears OPEC + will stick to its production increase of 400,000 barrels per day and resist calls to increase that number. The reason it’s no surprise is that they make more money at these higher prices and don’t want to do anything that might cause the prices to drop. It also illustrates that OPEC + can and will ignore requests from Europe and the United States to increase production.
Gerrad Heep, Grant Thornton National Partner in charge of energy – Audit: The focus on ESG implementation and the resulting internal and external reporting continues to increase, including the “E”, or environmental, for fossil fuel companies. It’s almost impossible to attend an energy conference with a focus on business or finance without ESG at least mentioned. Last week, Grant Thornton hosted his annual Energy Symposium. Of the six sections of the Symposium, one was devoted to ESG and the impact of ESG on the applicable topic was discussed in four of the remaining five.
Rigzone: What were the surprises of the market?
Seng: The OPEC + group failing to ramp up production with Brent prices in the 1980s was surprising, along with record prices in the UK and Europe for natural gas.
Donnel: Energy Secretary Granholm suggested this week that the administration might be open to supporting releases of the strategic oil reserve or even a lifting of the export ban in the latest attempt to ease high prices at the pump. Comments on export policy were a bit out of the picture and would likely have little impact on achieving the desired effect. U.S. refineries are optimized for a heavier slate than the barrels of shale currently being exported, and global supply chains could do without more abrupt changes.
Mcnulty: I found Japan’s announcement to restart part of its nuclear power very interesting in order to support its expansion of renewable energy development efforts. This shows that a reliable basic power supply, such as nuclear, is still critical enough for a modern industrialized grid to operate as renewable energy capacities expand. Plus, it doesn’t hurt that nuclear power is essentially a zero-emission power generation option.
Heep: It is no surprise that the price of WTI and Brent has remained stable. The very bullish outlook some for the price of crude is somewhat surprising. There is a feeling that 1) continued government spending, 2) increased demand for products and services, and 3) a supply chain that cannot meet demand will result in much higher inflation. In this scenario, it is theorized that crude prices could reach $ 100 or more in 2022.
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