Wednesday, 20 February, 2019

Oil prices high on expectations of United States inventory drains

The world’s most expensive oil Global Look Press
Nellie Chapman | 13 January, 2018, 07:23

"We estimate that WPI could rise by 0.5-0.7 per cent on account of a 10 per cent increase in crude price, while the impact on retail inflation would be less pronounced given the lower weight of oil related products and can be in the region of 0.3-0.35 per cent", it said. In particular, USA crude oil production is expected to increase more quickly than any other country. According to the Q4 Dallas Fed Energy Survey published at end-December, 42 percent of executives at 132 oil and gas firms expect the US oil rig count to substantially increase if WTI prices are between $61 and $65 a barrel. Accordingly crude import bill will rise by around USD 1.5 billion for every dollar increase in crude price, the report said.

Much of the production growth will be concentrated in the Permian Basin, the largest US oilfield stretching across Texas and New Mexico, said John Staub, the EIA director of the office of petroleum, natural gas and biofuels analysis.

The IEA warned that mostly due to USA shale, total supply growth could exceed demand growth.

It's estimated that US oil carries a $0.50/b premium over oil from the North Sea, due to the longer and more hard shipping route.

Prices have adjusted to beckon more supply, and these signals appear to be working. Customers buying gasoline at grocery stores and other independent retailers may pay more than those shopping at name-brand outlets after the biggest gasoline pipeline in the USA sprung a leak in Alabama on September 9.

So far, this extra supply seems to have been enough to satisfy demand.

"There is no panic", OPEC Secretary-General Mohammad Barkindo told reporters in Abu Dhabi when asked about oil prices at the $70 a barrel level.

Global consumption of petroleum and other liquid fuels grew by 1.4 million b/d in 2017, reaching an average of 98.4 million b/d for the year. That compares with an average build of 6 million barrels for the same period from 2013-17.

Distillate inventories also saw a build this week of 4.685 million barrels, against a forecast of a 1.464-million-barrel build.

The main question for USA gasoline stocks will be whether last week's storm that brought ice and snow up and down the East Coast dampened demand, as expected with drivers trying to stay off the roads. Also, the dollar fell in a broad sell-off after a report that China was ready to slow or halt its USA treasury purchases.

Gasoline stocks normally increase toward the end of the year.

For more information on crude oil, visit the S&P Global Platts website.