Shale Production to Rise by End of June
June 18th, 2020
The propane inventory report showed that total stocks of propane were up 2.685 million barrels. The Midwest stocks were up 408,000 barrels with total Midwest stocks at 16.356 million barrels and last year at this time there were 19.113 million gallons. The Gulf Coast stocks were up 664,000 barrels putting total Gulf Coast stocks at 42.392 million barrels and last year at this time there were 43.299 million barrels. Production was still good at 2.142 million barrels. Total stocks are 68.967 million barrels and last year at this time there were 69.530.
The DOE inventory report said that crude oil stocks were up 1.22 million barrels putting total stocks at 539.28 million barrels. Crude oil stocks at Cushing, Ok were down 2.608 with total stocks at 46.836 compared with last year when stocks were 53.582 million barrels.
Gasoline stocks were down 1.666 million barrels putting total stocks at 256.995 barrels which compares to last year at this time when there were 233.221 million barrels.
Distillate stocks were down 1.36 million barrels putting total stocks at 174.471 million barrels which compares to last year at this time when stocks were 127.821 million barrels.
US shale producers are expected to restore about 500,000 bpd of crude output by the end of June, amounting to a quarter of what they shut since the coronavirus pandemic cut fuel demand and pressured prices. US producers cut supply by about 2 million bpd and the recovery in benchmark oil prices to around $40 per barrel makes some shale output profitable again, even though that level is unlikely to spur additional new drilling activity. Larger producers are restarting operations of low-cost plays in Texas but also in expensive shale basins in North Dakota and Oklahoma. Producer are also pumping oil out of storage, which filled when demand fell. However, the increase in production may not last as North American oil companies have cut spending by 35% and US rig counts fell to a record low. Producers also cautioned that rolling coronavirus outbreaks may continue to restrict fuel demand.
OPEC released its monthly report yesterday and forecasted world oil demand would fall by 6.4 million bpd in the second half of 2020. However, this is much less than the 11.9 million bpd loss in the first half of 2020. OPEC forecasted a total decline of 9.1 million bpd in world oil demand for 2020, which was unchanged from last month’s report.
EIA reported on 6/17/2020 that total US gasoline product supplied (implied demand) fell slightly by 31,000 bpd down to a total of 7.870 million bpd for the week ending June 12th. US gasoline implied demand is down by 20.9% over the past 4-weeks versus last year and down by 16.3% based upon a cumulative daily average versus last year.
EIA reported on 6/17/2020 that total distillate product supplied (implied demand) rose by 252,000 bpd up to a total of 3.555 million bpd for the week ended June 12th. US distillate demand is now down by 20.2% over the past 4-weeks versus last year and down by 10.7% based upon a cumulative daily average versus last year.
Optimism about demand increases as states reopen versus new outbreaks of the coronavirus are the debate of the market and have it congesting for now. Bulls need to push prices higher and break out above the recent highs to have a chance at more upside. The longer we conquest below the highs leaves the market open for a downside correction.