Crude Stockpiles to Anchor Pricing Through Year End
July 6, 2020
Crude oil and refined fuel products rose by 2.1% to 3.5% on Thursday, with RBOB gasoline leading the way up by 3.5% and WTI crude oil rising the least by 2.1%. the rise in prices was mainly due to a much better than expected jobs report for June, a drop in US rig count this week, and due to the largest weekly withdrawal, this year for US crude oil stocks for the week ended June 26.
Baker Hughes report on Thursday July 2 showed that the US dropped 3 crude oil rigs down to a total of just 185 rigs. Last year at this time there were 788 crude oil rigs. US crude rigs have fallen by a total of 498 rigs over the past 16 weeks. The US now has the lowest rig count since June 12th, 2009.
Genscape reported that crude oil stocks in Cushing, OK in the week ending Tuesday June 30th increase by 765,840 barrels.
Goldman Sachs said an increase in commuting, a shift to private transportation and government efforts to improve economies with higher infrastructure spending should help global oil demand return to pre-coronavirus levels by 2022. Demand is expected to fall by 8% this year, before rebounding by 6% in 2021 and fully recovering to pre-pandemic level by 2022.
Traders and analysts said near-record crude stockpiles at the us Gulf Coast will anchor prices of domestic oil grades through the end of this year and into next. Stocks along the US Gulf Coast, known as PADD III, were near record levels following several weeks of cheap imports, sluggish exports and weak refining demand. Traders are concerned that the rise in coronavirus cases will keep fuel demand suppressed. Weakness in Gulf Coast prices, due to a glut of storage, has stemmed the flow of barrels to that region from inland. The amount of oil shipped from Cushing, Oklahoma to the Gulf Coast in May was about 15,00 bpd lower than in March , according to Genscape.
The Wall Street Journal is reports that, “US crude supply is falling at its quickest pace ever, easing a global oil glut and spurring a swift recovery in fuel prices.”
Declines in production and how the recovery continues are key factors in how the market goes. Equities are also continuing to rally and that is supportive to energy prices.