Crude oil is rising on peak oil concerns. OK, not the old failed ideology of “peak oil” but the fact that U.S. oil supply in the U.S. may have peaked as well as Exxon Mobil’s proven reserve. The American Petroleum Institute in its weekly report said we had the first crude oil drawdown of the year and the biggest draw in Cushing, Olka., since April of last year.
Inventories up, and inventories down. Crude oil prices are conflicted about rising U.S. oil inventories versus a dramatic drop in global oil inventories. While the EIA reported a 2.8 million barrel increase, a report by Bernstein Energy is showing that global oil inventories have fallen by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter.
Today the EIA released their latest Short Term Energy Outlook Report, which shows that U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.9 million b/d in 2016 and 8.8 million b/d in 2017.
Despite all the talk about rising rig counts and the resilience of shale producers, the Energy Information Administration is predicting that U.S. production of both oil and natural gas is set to fall. In fact, for natural gas, this is a major event as this year will be the first time since the beginning of the shale revolution in 2005 that natural gas production would fall year-over-year.
Crude oil prices are roaring back as earth-shaking developments rock the markets: The Organization of the Petroleum Exporting Countries vows to follow through with a production cut, Hillary Clinton gets an all-clear from the Federal Bureau of Investigations and an earthquake in Cushing, Okla.--the major oil storage hub that is the delivery point for the West Texas Intermediate contract.
The enerygy complex is trading lower after the EIA released its latest weekly oil inventory report. The data showed Total Crude & Product stocks increased by 9.047/mmbls to 1340.731/mmbls for week ending Oct 28. Looking at the year-on-year for Total Crude & Product stocks we see we are now 70.2/mmbls above last year’s level for this time of the year and above the five-year average by 229.1/mmbls.
Crude oil prices hit a new high for the year as refinery runs and imports hit lows for the year. The Energy Information Administration (EIA) reported a 5.2 million barrel drop in crude oil supply even as U.S. refinery runs fall to 85% of their operable capacity--the low for the year. Refiners ran a mere 15.4 million barrels of oil a day while overall product demand is running more than 20 million barrels a day.
It was not just the hurricanes that impacted supply as a reported 703,000 barrel drop in Cushing, Okla., helped reduce supply as well. We know that supply will rebound in the coming weeks and the number is supportive but the drawdown in Cushing, Oklahoma is supportive as well. The API also reported a 2.34 million barrel drop in gasoline supply as well as a 944,000 barrel increase in distillate stocks.
Dave Tolleris, meteorologist at WxRisk.com, said that next week we will have a storm that everyone will be talking about. While the Atlantic is a hot bed of tropical activity, Tolleris is very concerned about the development of Invest 99-L, which may be developing into a tropical depression or tropical storm today. If the storm is upgraded, it will be named Hermine, and according to Tolleris, the storm has the potential to become a category 4 Hurricane in the Gulf of Mexico next week.