Of all the weeks that one might expect to see a draw in crude oil and here we saw a build! After shocking drawdowns in supply the previous two weeks without much rhyme or reason, one might have thought that this week would be the week that you would have seen a drawdown. There were bad storms in the Atlantic and Hurricane Ernesto and pipeline leaks and refinery fires.
Yet according to the American Petroleum Institute, crude oil shook off its string of supply losses, reporting a build of 2.784 million barrels of oil. Despite the fact that we saw outages at BP in Whiting and glitch’s at other refineries, magically refinery runs increased to 92.6. Distillate supply increased and gas supply fell by 2,007. The numbers slowed the momentum of this quiet oil bull market and we are waiting to see if the Energy Information Administration confirms these supply numbers.
Gas prices in Chicago are coming down and products dipped when BP Whiting confirmed that their coker unit had restarted. It will be interesting to see if the build in gas supply was due to a steep drop in demand because of a steep jump in price.
Alaska drill down! I had a lot of comments on the Wall Street Journal report surrounding the Obama Administration's plan to open up parts of Alaska. I was almost ready to jump on the band wagon and just waiting for Obama to say, "Why should all those caribou have the oil...they didn't build that! It is big caribou greed, pure and simple." Yet in my haste to bring you the report as early as possible, perhaps I gave the Obama administration too much credit.
John Miller wrote, “Phil: I enjoy your reporting, but your 8/14 article is misreading the issue in Alaska. I am a former executive with Atlantic Richfield and former Chair of the Trans-Alaska Pipeline Owners' Committee. I refer you to my book The Last Alaskan Barrel: An Arctic Oil Bonanza that Never Was. Re: NPRA, in its 90-year history, not one barrel of commercial oil has been produced -- 550 million barrels of potential economically recoverable oil which has not been discovered will not save TAPS. The announcement by the Administration has killed any chance of moving oil discovered in the Chukchi Sea to TAPS across NPRA. This announcement is anything but great news for Alaska!”
John’s book, "The Last Alaskan Barrel" is an analysis of the fifty-year investment life of Alaska North Slope oil and what oil prices, development costs, environmental regulations and risks, timing, and a variety of taxes did to the earnings. During his 26-year career with Atlantic Richfield Company, John M. Miller managed long range planning, business development, and operations in the U.S., Norway, Japan, Korea, China and Indonesia. He also chaired the Trans-Alaska Pipeline System (TAPS) Owners Committee.
John is saying that this is another missed opportunity and while it is generally assumed that oil companies cannot wait to "drill, baby, drill" on Alaska's North Slope, that on the contrary, in light of the first fifty years of Alaska North Slope experience, it is becoming increasingly likely that the bulk of any remaining oil and gas resource will remain undeveloped.