US Shale Producers Are Reversing Production Cuts As Prices Rebound
June 3rd, 2020
The inventory update from the private firm API was released yesterday and it called crude oil supplies down 483,000 barrels. The average estimate for today’s DOE report is for a build of 3 million barrels. The API reported that Cushing, Ok crude oil supplies were down 2.2 million barrels.
Gasoline supplies on the API report were up 1.7 million barrels and the outlook for today is for a build of 1 million barrels.
Distillate supplies were up 5.9 million barrels in the API report and the estimate for today is for a build of 2.7 million barrels.
The average estimate for today’s propane inventory update is for a build to supplies of 1.71 million barrels.
Energy research firm Kpler, estimates that there was 2.06 million barrels of gasoline in floating storage on the Gulf Coast for the week ending May 31st, up from 1.06 million barrels the week earlier. The company also estimates that flows of diesel from the United States Gulf Coast to Europe edged up marginally during the month of May reaching 310,000 million tons, but off 48% from a year earlier.
S&P Global Platts warned that US ULSD exports to Europe in the coming weeks could remain restricted as American export are forced to compete for market share with exports from India and the Arab Gulf Coast as those refineries begin to ramp back up.
Prices rallied yesterday as the easing of coronavirus lockdowns continues and the news that OPEC+ is considering extending it production output cuts. If the OPEC+ output cuts are extended 2 or more months, some analysts think this should support prices especially Brent crude oil which could rise to $40 to $45. If the OPEC+ cut is only for one month this would disappoint the market and price could fall. Then of course they most perform on these cuts. The rumblings in the market right now are that the OPEC+ cuts will be through September.
US shale oil producers are reversing production cuts as prices rebound, underscoring shale’s ability to quickly adjust to pricing and posing a challenge to OPEC as it considers extending production cuts. US producers began cutting output in March as oil prices fell. However, Parsley Energy and EOG Resources disclosed plans to restore some or all of their output cuts. In North Dakota, state energy officials cut an estimate of production shut ins by 7% in the second largest US shale field. Parsley plans to restore all of the 26,000 bpd it cut earlier this year and EOG Resources said it would reopen the shut in wells and add new ones in the second half of the year. Rystad Energy estimates US production will pare 1.3 million bpd to 1.35 million bpd in June, down from 1.65 million bpd cuts it had initially expected.
According to Reuters, China oil demand is back to near 90% of the levels seen before the coronavirus pandemic. Traders are surprised but say this could be an indication of how the rebound happens elsewhere as more countries emerge from lockdowns.