Oil prices — as I predicted — are trying to find their seasonal bottom. A bounce yesterday on strong retail sales and happy talk out of Europe, seemed to give the complex a technical bounce. While not out of the woods yet, the crude bulls are trying to build confidence. We also saw Brent crude start to break against the WTI as production and pipelines and the talk of more OPEC production helped break the spread and give oil a boost. Now add to that a very supportive American Petroleum Institute report and it looks like oil is trying to spring ahead of the upcoming summer driving season.
Oil bounced from technical support cheered on by comments out of European Central Bank council member Jens Weidmann who said the euro exchange rate won't derail the region's economic recovery. On top of that, we saw a Redbook Retail sales improve in the first week of March up 2.7% above year ago levels and 0.6 percent over year ago levels.
The Brent looks weak compared to WTI. Bloomberg reports that daily exports of the 12 main grades of North Sea crude for loading in April will rise by 8% to the highest in 10 months, according to loading programs obtained by Bloomberg News. Shipments of Brent, Forties, Oseberg,Ekofisk, Statfjord, Gullfaks, Alvheim, Aasgard, DUC, Flotta, Grane and Troll blends will total 61.2 million barrels, or 2.04 million barrels a day, compared with a revised 1.9 million this month. That is the most since June. Loadings of Forties, the most abundant of the four grades that make up the benchmark Dated Brent, will rise by one cargo, or 9%, to 420,000 barrels a day next month. The 200,000 barrel-a-day Buzzard oil field, the largest contributor to the Forties stream, returned from maintenance 10 hours ahead of schedule on March 4, Patti Lewis, a Calgary-based spokeswoman for the platform's operator, Nexen Inc, said on March 5.
The API report was also supportive overnight as crude oil stocks surprisingly fell. The API reported that crude stocks fell by 1.4 million barrels as a drop of Gulf Coast supply showed slowing imports reflecting in part, foggy weather that slowed shipping traffic in Houston. Supply in Cushing, Oklahoma fell in a sign that oil is getting out of Cushing which also puts more pressure on the Brent crude/West Texas Intermediate.
Gasoline supply also fell harder than anticipated falling by 3.1 million barrels. Weak demand and the seasonal drawdown of winter-time supply continue.
Natural gas is hanging around in the front end of the curve and interest is building in the back end. The December 2015 actually closed over a penny. The Energy Information Administration moved to reflect growing demand, increasing demand expectations by 0.7% to 70.02 BCFD per day! Wow! Supply then will rise only by 0.7% to 69.6 BCFD less than the last report. The EIA also cut its 2013 world oil demand growth forecast by 40,000 barrels per day to 1.01 million bpd. The oil demand growth estimate for 2014 was cut by 10,000 bpd to 1.40 million bpd.
Petroleum: "Higher U.S. oil production means America will need less imported oil. After reaching a record 60% of domestic oil demand in 2005, net oil imports next year are forecast to fall to 32% of consumption, the lowest level since 1985.”
The trend of falling U.S. oil imports and rising Chinese oil demand is moving China closer to passing the United States as the largest global net oil importer. Net oil imports for the United States and China were on par at 6 million barrels per day in December 2012, according to the most recent trade data from EIA and China's General Administration of Customs. "
Gasoline Prices: "U.S. average gasoline prices have declined over the past two weeks, with the price at $3.71 on March 11. Previously, U.S. average gasoline prices had risen from an annual low of $3.25 per gallon on December 17, 2012, to $3.78 per gallon on February 25, 2013, which was the highest pump price ever during the month of February." "Also, EIA expects the switchover from winter to more costly summer-grade gasoline will keep average gasoline prices near current levels through the spring before falling crude prices help reduce U.S. gasoline prices to an average $3.50 per gallon in the second half of this year and then to $3.38 during 2014."
Natural Gas: "U.S. natural gas production should level off from the growth seen in recent years, and natural gas consumption is expected to remain around 70 billion cubic feet per day for 2013 and 2014.”"As the winter heating season comes to an end, EIA expects natural gas inventories at the close of March will total just under 2 trillion cubic feet. That is less than the unusually high 2.5 trillion cubic feet seen last year, but still more than the five-year average of 1.7 trillion cubic feet.” “EIA expects the Henry Hub natural gas price will gradually rise through the end of 2014 but remain below an average $4 per million Btu throughout the next two years.”
Electricity: "During 2012 the amount of power generation in the United States fueled by coal declined by 13%. Some of this reduction was due to the retirement of coal-fired generating capacity. " "The electric power industry retired 7.9 gigawatts of coal-fired generating capacity last year, which represents 2.5% of the installed coal capacity at the beginning of 2012. In comparison, power suppliers retired 2.6 gigawatts of coal capacity during 2011 and on average 1 gigawatt annually between 2006 and 2010. The coal‐fired capacity retired during 2012 was offset somewhat by the addition of five new coal‐fired generating units with a combined capacity of 3.6 gigawatts.” " Although more retirements are likely this year, EIA expects power generators to increase their use of existing coal capacity in response to higher natural gas prices relative to coal prices, leading to a 6.2% increase in coal generation during 2013.”