EIA Slashes Short-Term Oil Demand Forecast
April 8th, 2020
The API inventory report had some big numbers as crude appears to finally be getting stored at a fast pace. Crude stocks as reported by the API were up 11.9 million barrels and the crude oil stocks at Cushing, Ok were up 6.8 million barrels. Gasoline stocks were up 9.4 million barrels and distillates were down 177,000 barrels.
The average estimates for today’s DOE inventory update from the Reuters’ survey are calling crude up 9.03 million barrels, gasoline up 4.3 million barrels and distillates up 1.4 million barrels.
In its Short Term Energy Outlook, the EIA cut its 2020 world oil demand growth forecast by 5.6 million bpd to 5.23 million bpd. It raised its oil demand growth estimates for 2021 by 4.68 million bpd to 6.41 million bpd. The EIA also reported that US petroleum and other liquid fuels demand is expected to fall by 1.033 million bpd to 19.13 million bpd in 2020, compared with an increase of 60,000 bpd forecasted last month. US petroleum demand is expected to increase by 1.26 million bpd to 20.39 million bpd in 2021, compared with an increase of 200,000 bpd forecast last month. The EIA also reported that US crude oil output in 2020 is expected to fall by 470,000 bpd to 11.76 million bpd, while output in 2021 is expected to fall by 730,000 bpd to 11.3 million bpd. Separately, the US Energy Department said US oil drillers are expected to reduce their oil output by about 2 million bpd as the fall in crude prices forces companies to cut back operations. It said the cuts were driven by the private sector and the free market.
US President Donald Trump on Monday said that OPEC had not asked him to urge domestic oil producers to cut production to support prices. He also said that US output was declining in response to falling prices. The US Department of Energy said that US output is already falling without government action, in line with the White House’s insistence that it would not intervene in the private markets. The decline, however, would take place slowly, over the course of the next two years.
The Vice President of energy consulting at IHS Markit, Victor Shum, is predicting that Brent crude oil will fall to $10 per barrel in April and will likely remain at that level in the second quarter. He said, “there is little chance of any OPEC+ deal that’s going to save the crude oil market from the attack of the COVID-19.”
Standard Charter said it is skeptical that energy ministers can do enough this week to justify the current market optimism. It said there is nothing this week’s meeting can do to reduce the 660 million barrels of surplus oil that will need to go into storage in April.
It is a bit of an odd situation but as gasoline demand came to a halt as the result of lockdowns stocks of gasoline are now very ample, So abundant are they that it has created a problem for diesel. As gasoline storage gets full and the pipelines get it has resulted in a “clogged” system if you will. This is making it difficult to move any product. Gasoline price have come down dramatically as companies try to get gasoline to move somehow. If they cannot get it moved, then ultimately refineries will scale back or shut down as there will be no place to go with any production gallons. The issues for diesel are if the system cannot move product period, then diesel supplies get tight. As there is still some demand for diesel as trucking is still running and farmers are gear up for spring.