Oil Market Cherry Picking US Rigzone Inventory Data

(Points of view and opinions expressed in this article are those of attributed sources and do not necessarily reflect the position of Rigzone or the author.)

In this week’s edition of the Oil and Gas Industry Successes and Failures, regular market watchers from Rigzone take a closer look at inventory data from the US, Shell and ConocoPhillips’ main deal with Permian. , Covid developments and more. Read on to find out what they had to say.

Rigzone: What were some of the market expectations that actually occurred over the past week, and which ones did not?

Barani Krishnan, Senior Commodity Analyst at investing.com: One bit of a surprise is that oil markets appear to be choosing US inventory data to maintain an upward tilt in crude prices, even as gasoline stocks surged last week. The other is that about 16 percent of oil production on the US’s Gulf of Mexico coast remains closed for nearly a month after Hurricane Ida, a phenomenon that no one could have foreseen at the time.

Jon Donnel, CEO, B. Riley Advisory Services: The first month’s WTI contract rose to its highest price since July as demand remains strong and production in the Gulf of Mexico has not returned to pre-Hurricane Ida levels. Total product supplied has remained above 20 million barrels per day on a continuous four-week basis during the third quarter, the first time since 1Q20. Total US production remains below 11 million barrels per day, only recovering about a third of the decline attributable to recent hurricanes. As a result, crude inventories declined for the sixth consecutive week and are at levels below the comparable period in 2019. Overall, supply and demand fundamentals continue to support year-end commodity prices. .

Michael Osina, Grant Thornton National Partner in Charge of Energy – Tax: Rig counts continue to slowly rise as many experts forecast a more stable oil price. Covid remains the wild card for the energy industry, as the potential impact of vaccine mandates leaves a lot of uncertainty about how it will affect the travel industry. However, with Biden announcing the relaxation of travel restrictions for vaccinated foreign passengers, this could have a positive impact on the economy and therefore the energy industry as well.

Rigzone: What were some of the surprises in the market?

Krishnan: US crude reserves fell by 3.481 million barrels in the week through Sept. 17, the Energy Information Administration said in its weekly inventory update. Analysts tracked by Investing.com had forecast a 2.45 million barrel drop for the week. In the week leading up to September 10, crude extraction soared to 6.422 million barrels, nearly double expectations due to Ida-related disruptions. The larger-than-expected reduction for the second week in a row puts crude prices in a better position, without a doubt. Inventories of distillates, which include diesel and heating oil, fell by 2.55 million barrels last week versus expectations for a 1.11 million barrel extraction, EIA data showed. In the previous week, distillate inventories fell 1.69 million barrels. Arguably, this also helps defend oil prices.

However, what is puzzling is how the market decided to completely ignore gasoline reserves, which showed a surprising build-up of 3.47 million barrels last week, compared to forecasts for a withdrawal of 1.47 million barrels. barrels. Gasoline is a more important weekly data than distillates and sometimes even raw. It is the component with the highest demand for oil. Gasoline demand has dropped from the summer peak of 9.4 million barrels per day to around 8.8 million barrels now. In the previous week, gasoline stocks fell 1.86 million. This time he totally opposed the downtrend in the market. And what did the market do? He decided to reward the crude bulls with a two percent price hike on Wednesday.

As for the impact of Ida, about 16 percent of the oil production in the Gulf of Mexico Coast in the United States, which represents 294,414 barrels equivalent, remained closed until Wednesday. While the continued disruption is still somewhat surprising, it was still markedly lower than last week’s closing levels of 25 percent.

Donnel: ConocoPhillips acquired acreage and production in the Permian Basin from Shell for $ 9.5 billion earlier in the week. RDS has been candid about its desire to reduce its carbon footprint over time, but it was surprising to see COP step in as the buyer of such a large transaction given its recent purchase of Concho and its focus on returning cash to shareholders as described. in its 10-year plan presented in June. That said, the transaction has been well received by the market as COP announced an increase in its regular dividend. The company updated its long-term forecasts and expects the deal to produce incremental free cash flow and an additional advantage for higher commodity prices, while reducing the intensity of greenhouse gases over the period of time. 10 years. The agreement highlights the relatively low cost of supplying the Permian Basin assets and the benefits of acreage consolidation for operators.

In pieces: Industry experts have been attentive to the fiscal policy of the new administrations, as it affects the energy industry. In the most recent version of the draft tax law, there were some notable omissions in the margin, including the planned repeal of many oil and gas tax incentives. It is unclear if this is now off the table or if it was simply scrapped because it would be difficult to convince sufficient support for those measures.

To contact the author, email andreas.exarheas@rigzone.com

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