If almost on cue and just as I said one day earlier, gas confirmed a major top and we got a wild drop against a back drop of some historic numbers on U.S. oil production! RBOB fell like a rock as the gas bubble popped and the sellers rocked. Rebounding East Coast supply and the Colonial Pipeline Company said that they "essentially completed” an expansion of an oil pipeline that will add 60,000 barrels of capacity to a pipeline that will carry oil products like gas to Linden, New Jersey, from Greensboro, North Carolina. Add to that, the Energy Information Administration not only told us that oil supply is rising in the short term, but U.S oil production is beginning to rock our world!
The Energy Information Administration reported that U.S. oil production surged by a whopping 14.6% to the highest level since 1995. The report also said that U.S. monthly oil production has topped 7 million barrels per day (bpd) for the first time in 20 years. The U.S. Energy Information Administration's new Petroleum Supply Monthly report, released on Wednesday, revised up U.S. crude oil production for November 2012 from 6.893 million bpd to 7.013 million bpd; marking the first time any U.S. monthly oil output was above 7 million bpd since December 1992. Crude oil production for December 2012 was even higher at 7.030 million bpd.
At the same time The Energy Information Agency says the U.S. is breaking its addiction to gasoline as U.S. demand fell to the lowest level in 11 years in the aftermath of hurricanes like Fay, Gustav, Hanna and Ike. In the short term, retail price increases are slowing as retailers are still trying to make back some of the money they lost on the way up. The inability to pass on all of the increases on the way up means prices may fall like a feather at first but soon they should fall like a rock.
The Brent spread, though, may not come in as much as our oil abundance might suggest because of more problems with North Sea Production. Overnight Dow Jones is reporting that NEXEN, the operator of the U.K.'s largest oil field, is carrying out repair work, as reports continue of reduced output. In a statement Canadian company Nexen Inc., which operates the 200,000 barrel-per-day Buzzard field, said: "We are taking advantage of the output restriction in the [Forties Pipeline System] to change a defective valve in our gas system." The slowdown had been linked to maintenance work at the BP PLC (BP)-operated Kinneil Terminal, which processes oil coming to land from the North Sea. But a person with knowledge of the situation told Dow Jones Newswires Wednesday that the shortfall wasn't linked to the work taking place at Kinneil. Reduced production at Buzzard may continue into the coming days, when planned maintenance work is due to take place. The trader said that this would probably be between March 1 to the 10th.