The average retail price of regular gasoline in the United States has risen by 6% over the past five weeks heading into the Labor Day weekend, the U.S. Energy Information Administration (EIA) said on Thursday. On the Monday before the Labor Day weekend, August 28, 2023, the retail price of regular gasoline averaged $3.81 per gallon across the U.S. Prices have increased by 6%, or by $0.22 per gallon, over the past five weeks, due to oil production cuts by Saudi Arabia, low U.S. gasoline inventories, and announced refinery maintenance in the U.S. Northeast. After adjusting for inflation, retail gasoline prices going into this Labor Day weekend were 4% lower than the prices ahead of Labor Day 2022, per the EIA’s Gasoline and Diesel Fuel Update.
The cuts from Saudi Arabia and other major OPEC+ producers have raised international crude oil prices in recent weeks, which are the largest component of the gasoline price in the U.S.
Lower-than-usual inventories and refinery outages in the U.S. have also put upward pressure on gasoline prices in America this summer, the EIA noted. Planned maintenance at two refineries, one in Canada, and one in Pennsylvania, from mid-September to mid-November are also expected to keep gasoline supplies limited, especially in the Northeast, the administration noted. “Record temperatures in the South also caused unexpected refinery disruptions, contributing to a nearly 35-cent jump” so far this summer, fuel-savings app GasBuddy said on Tuesday. “While gas prices have started to ease as the summer winds down, there still could be one last hurrah at the pump before things cool off this fall,” according to GasBuddy. Patrick De Haan, head of petroleum analysis at GasBuddy, commented, “If we can escape further unexpected oil production cuts and outages due to hurricanes, we may avoid an unexpected surge in gas prices, with the downturn accelerating as we get into late September and stations transition back to cheaper gasoline.”
Russia will announce its steps next week, Novak tells Putin
Russia has pledged to curb exports by 300,000 b/d in September
Russia has agreed with its OPEC+ partners on further cuts to its crude exports, Deputy Prime Minister Alexander Novak told President Vladimir Putin. “We have agreed, but we’ll announce main parameters next week,” Novak said at a televised government meeting with Putin. Russia has pledged to curb its crude exports by 500,000 barrels a day in August, then taper the curbs to 300,000 barrels a day next month. On Wednesday, Novak said that Russia was discussing extending the September export reduction into October, according to media reports. The statement from Russia, one of the two de-facto leaders of the Organization of Petroleum Exporting Countries and its allies, comes amid market expectations for Saudi Arabia to extend its 1 million barrel-a-day oil supply cut by one month into October. While global crude markets are tightening as demand climbs toward record levels, this summer’s price rally has stalled on mounting concern over economic growth in China. The pullback poses risks for Riyadh, which has seen its foreign reserves slump to the lowest since 2009. Oil prices soared to a six-month high above $88 a barrel in London last month, but have since subsided as China — the biggest importer — contends with crises ranging from youth unemployment to turmoil in its property and shadow-banking industries. Russia’s September export cuts will be measured against the average May to June level, Novak said earlier this week. While Novak didn’t provide a precise baseline figure, industry data seen by Bloomberg show that the country exported an average of 4.86 million barrels a day from May to June by sea and pipelines.
The U.S. economy has proven to be remarkably resilient this summer.
Standard Chartered: jet fuel and gasoline demand in the U.S. have exceeded EIA demand expectations from earlier this year.
The pattern of stronger-than-expected oil demand from consumers and weaker-than-expected demand from industry is likely to continue in the coming months.
Earlier in the year, Wall Street was mostly bearish about the U.S. economic outlook with many warning of a looming recession. Not surprisingly, many oil punters expected oil demand to crash as unemployment rose and companies cut output thanks to aggregate demand falling.. The economy has proven to be remarkably resilient, managing to expand at a respectable annual clip of 2.4% in the second quarter after growing 2% in the first quarter. The unemployment rate currently stands at 3.6%, close to a 50-year low, while employers are still adding hundreds of thousands jobs every month. In early July, 71% of forecasters in an NPR survey said a recession is unlikely in the coming year.
Oil demand has generally held up much better than predicted.
According to commodity analysts at Standard Chartered, gasoline and jet fuel demand–both closely associated with household behavior– have outperformed strongly relative to the start-of-year expectations by the Energy Information Administration with gasoline demand having risen 98 kb/d y/y. In contrast, the industrial side of things has been below par, with demand for distillate (including diesel) failing to meet expectations with distillate demand down 169 kb/d y/y; gasoline demand has risen y/y by 98kb/d. StanChart notes that a strong deflationary price effect from U.S. gasoline has all but disappeared, with gas prices only marginally lower than year-ago levels. The national average of regular gasoline is hovering above $3.80 per gallon for the fourth consecutive week and may represent a headwind to gasoline demand. Nevertheless, the analysts have predicted that the pattern of stronger-than-expected oil demand from consumers and weaker-than-expected demand from industry is likely to continue in the coming months. StanChart has also revealed that whereas volatility in the oil prices remains low, there’s been plenty of activity with Brent trading volumes over the past week 23%Y/Y higher and open interest 19% higher y/y. After years of rising production costs amid post-pandemic inflation, the U.S. Shale Patch can finally breathe a sigh of relief after the cost trajectory hit a turning point. Production costs fell 1% year-on-year in the second quarter, marking the first time they have shrunk in three years. Drill pipe prices have halved this year, daily rig rates are down by more than 10% and the costs of steel and diesel are also trending lower. According to Goldman Sachs via Bloomberg, Drill pipe prices have fallen by 50% this year; daily rig rates are down by more than 10% while the costs of diesel and steel have been gradually declining. Only labor has been defying this trend as wages continue rising. Whereas a decline of a single percentage point might not make much of a difference on the bottom line, Goldman says costs will be 10% lower in 2024, enough to boost profits and cash flows significantly. Easing price pressures are most welcome: after two years of bummer earnings and copious cash flows, the U.S. oil and gas sector is set to record a decline on both metrics in the current year. On a global scale, Reuters market analyst John Kemp has warned that India’s slowing oil demand growth will act as a drag on oil prices despite consumption recently hitting record highs. India’s oil consumption grew by ~255,000 barrels per day (bpd) during the first seven months of the current year, helping to grow total consumption to 135 million metric tons in the first seven months of 2023 compared to 128 million metric tons for last year’s corresponding period. However, that growth clip was considerably slower than 415,000 bpd posted in 2021/22 as economies rebounded from the coronavirus pandemic and lockdowns. In comparison, consumption growth in the U.S. clocked in at 1.0 million bpd in the first five months of 2023, although, in fairness, the U.S. consumes nearly 4x as much oil as India. But not everybody shares that bearish view. Commodity analysts at Standard Chartered have weighed in, saying that fundamentals in the oil markets remain strong despite the recent reversal by the oil price rally following weak economic data from China.
Global oil markets remain tight, with StanChart estimating that the August global inventory draw clocked in at 2.8 million barrels per day (mb/d), with a further 2.4 mb/d draw forecast for next month.
The experts have predicted that inventory tightening will remain the dominant price driver in the coming months, but have warned the markets are still capable of slipping back into the macro-driven angst that we witnessed in the second-quarter for periods.
Separately, a group of analysts have predicted that Saudi Arabia is likely to extend its voluntary 1 million-barrel oil supply cut for the third consecutive month into October amid uncertainty about supplies, five Wall Street analysts have predicted. The initial cuts appear to have worked, with oil prices climbing about 15% in the past month to about $86 a barrel.
According to StanChart, highly effective producer output restraint, led by Saudi Arabia, will create the conditions for a price rally that will take Brent prices above this year’s high at $89.09/bbl onto their Q4-average forecast at $93/bbl, with a likely intra-quarter high above $100/bbl.
US oil stocks fall more than expected on strong export, refinery demand -EIA
Crude oil stockpiles in the United States decreased by 10.6 million barrels to 422.9 million barrels in the week ending August 25, the US Energy Information Administration said in its weekly report on Wednesday. Total commercial petroleum inventories were down by 8 million barrels. Crude oil refinery inputs averaged 16.6 million barrels per day during the same week, 173,000 barrels per day less than the previous week’s average. Gasoline production rose last week, averaging 10 million barrels per day, while refineries operated at 93.3% of their operable capacity in the same period. Meanwhile, crude oil imports averaged 6.6 million barrels per day last week, down by 316,000 barrels compared to the previous week. NN: Reality is oil stockpiles falling because production is less than demand….. Enjoy
(Reuters) – A look at the day ahead in U.S. and global markets by Amanda Cooper. One of the overarching market themes this year – aside from the hype around artificial intelligence – has been investors avidly building up bets on the Federal Reserve finally announcing an end to its cycle of rate hikes, only to have that optimism dashed. There’s no doubt that the U.S. central bank is nearing the end of its mission to wrestle down inflation. Headline consumer price pressures are rapidly abating, thanks to a wholesale retreat in food and energy prices. Headline inflation in July rose 3.2% on an annual basis – a far cry from last June’s 9.1% – and nearing the Fed’s 2% target.
There’s just a couple of easily identifiable snags.
Inflation as reflected in the Fed’s preferred data point – the core personal consumption in expenditures (PCE) index – is running at 4.1%, having peaked February 2022 at 5.4%. The economy isn’t generating jobs as quickly as it was a year ago, but it’s still set to add another 170,000 in August, which will mean more than 25 million workers will have been added to non-farm payrolls since the depths of the COVID pandemic in April 2020. And crucially, Fed Chair Jerome Powell has once again reinforced the “higher for longer” mantra that has underpinned most of his, and his officials’, communications this year, no matter how much market participants have bet otherwise. The dollar, which economist Mohammed El-Erian described earlier this year as “the cleanest dirty shirt” among world currencies, is set for a 2% gain in August, marking its strongest monthly performance since May, thanks in large part to anticipation of at least one more Fed rate hike before 2023 draws to a close. U.S. two-year Treasury yields, the most sensitive to shifts in expectations for Fed monetary policy, posted their largest weekly rise in two months last week, after Powell’s comments at the annual Jackson Hole Economic Policy Symposium.
He vowed to tread carefully with rate rises and rely on incoming data, but was clear about the endgame.”It is the Fed’s job to bring inflation down to our 2% goal, and we will do so,” he said.
While some asset managers are keeping the faith that the Fed is at the end of the cycle, speculators are taking no such chances. In the week to Aug. 22, data from the Commodity Futures Trading Commission showed non-commercial market participants expanded their bearish holdings of U.S. two-year Treasury note futures to the most since at least 1990, reflecting a bet that two-year cash yields will continue to rise. Money markets show traders believe the Fed has one more hike in the pipeline this year, which would bring its target rate to a range of 5.50%-5.75%, from 5.25%-5.50% right now. Just three months ago, when rates were at 5.125%-5.37%, markets were betting on a year-end range of 5.00%-5.25%, implying at least one rate cut this year. This week, investors get a dose of top-tier data to help shape their view on the Fed’s next move. A second read of U.S. gross domestic product is due on Wednesday, while core PCE and August non-farm payrolls arrive on Thursday and Friday, respectively. BlackMask Pod Cast:
United States crude inventories decreased more than expected last week, the American Petroleum Institute (API) said in its weekly report that US crude stockpiles dropped by 11.49 million barrels. Meanwhile, reserves in the industry hub in Cushing, Oklahoma, fell by 2.23 million barrels. The report is also said to have shown a rise of 1.4 million barrels in gasoline inventories and a 2.46-million-barrel jump in distillate stockpiles. Inventories are falling despite an increase in crude production.
“Ongoing strength in refining activity and crude exports have encouraged a solid draw to oil inventories, while peak summer refinery runs have resulted in builds for both gasoline and distillates,” said Math Smith, lead oil analyst for Americas at Kpler.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 3.1 million barrels last week – the biggest weekly draw since October 2021 – as barrels are pulled to the Gulf Coast to meet peak summer refining needs and export demand amid OPEC+ production cuts. NN: Do not let them shit you. Demand is soaring and production is peeking. forget the china is or is not. China is happening. Want proof? Look at the inventory numbers. Every week inventories drop by millions of barrels, They did not lose that much oil. They consumed it.
Major US stock markets extended gains on Tuesday following the release of a fresh batch of economic data. Previously, the US Bureau of Labor Statistics reported that job openings in the United States declined by 338,000 in July compared to the previous month, to hit 8.8 million. At 10:34 am ET, the Dow Jones gained 0.48% or 165 points, while the NASDAQ 100 added 1.5% and the S&P 500 rose 0.88%. At the same time, the euro improved by 0.25% against the dollar, selling for $1.08459. NN: As this rally continues we will begin shorting operations. Be sure you are adequately funded.
Experts predict that illnesses like RSV and the flu, which are both at very low levels now, will settle back into their seasonal patterns this year. Covid-19 cases could have a winter surge, but many experts don’t expect it to reach the heights of recent years unless the coronavirus throws us a wild card in the form of a new variant. Earlier this year, experts who study the evolution of the virus predicted that there was a 10% to 20% chance of that happening within the next two years. And there’s more good news: There are new tools to help protect the most vulnerable, in the form of vaccines and antibodies. Some of these are now available, with other expected to arrive in the weeks ahead. “We have three respiratory viruses that we think will be the major players for wintertime colds: Covid, flu and RSV. And for the first time in human history, we have vaccinations against all three of them,” said Dr. Buddy Creech, a pediatric infectious disease specialist at Vanderbilt University. However, he noted, “A shot is only so good if it gets into your shoulder.” Experts say there will be major challenges ahead to make sure everyone who needs these vaccines has access to them and feels comfortable getting them.
States gear up for this fall’s triple threat of respiratory viruses: Covid-19, flu and RSV The government is no longer purchasing Covid-19 vaccines for all, which means that cost will be passed on to insurers and potentially to patients themselves.Some of the questions about who will pay for the shots and their administration can’t be answered until the latest version of the vaccine is approved by the US Food and Drug Administration and recommended by the US Centers for Disease Control and Prevention.
BlackMask Pod Cast:
Conspiracy Theorists Trying to Create Panic
The delivery system for getting vaccines to adults is lacking, too. “We still don’t have a robust system in place for adult immunization advocacy and delivery and how to expand beyond the existing pharmacy chains and hospitals,” said Dr. Peter Hotez, co-director of the Texas Children’s Hospital Center for Vaccine Development. “This is especially true in rural and low-income areas. “This, and the fact that antivaccine activism has increased during the Covid pandemic, means that uptake of the three adult vaccines this fall … is likely to be low,” Hotez said.Here’s what experts are predicting as we look ahead to another respiratory virus season.
Covid-19
Covid-19 cases are getting an end-of-summer bump as people travel and seek indoor refuge from the record-breaking heat. “That tends to allow us to share germs with each other. And that’s certainly happening with Covid. And as I look around, friends and family and colleagues, there’s a lot of disease going on right now,” Creech said.Covid-19 hospitalizations have been on the rise since early July, according to data from the CDC. In the first week of August, more than 10,000 people were hospitalized with Covid-19. That’s a 60% increase over the course of a month, including a 14% bump in the most recent week. Rates are now at levels last seen in April, but this isn’t like the waves of the past.
Wood Mackenzie: the oil industry still isn’t spending enough for supply to meet demand.
WoodMac: investments in new production total $490 billion in 2023.
Despite the prospect of peak demand,Wood Mac analysts are worried about the lack of a spare production capacity cushion.
After years of warnings of failure to invest in enough new exploration, the industry has begun spending more. Yet, it would still be less than is necessary to secure enough supply to respond to demand. That’s the take of Wood Mackenzie analysts, at least, who recently reported that the oil and gas industry is currently in the third year of an upcycle, with this year’s investments in new production at $490 billion. This would be significantly higher than the low reached in 2020, which stood at $370 billion. Even though spending on its own is not enough to secure supply, the Wood Mac analysts noted in an interview for the firm that cost reductions will make up for the difference. They note the rise of U.S. shale and other non-OPEC sources, and forecast non-OPEC producers to maintain a constant market share in the coming years. Indeed, this chimes in with what U.S. oil industry executives reported during the latest financial reporting season. What the said, basically, was that wells were yielding more oil than expected, boosting total production. The reason wells were yielding more: technological improvements. Argus reported earlier this month, citing Pioneer Natural Resources, that well productivity since the start of the year has been trending significantly higher than the average for 2022. At the same time, however,
Bloomberg recently cited research from Enverus suggesting that shale wells were draining faster than previously assumed, with few untapped reservoirs left as the shale patch gets mature.
Besides U.S. oil, there is also Canada, Mexico, Brazil, and smaller producers such as Guyana. These have contributed significantly to global supply, but OPEC remains the biggest fish in the oil pond because of its common supply control policies. What’s more, with the expansion of the BRICS bloc, we get another grouping of some of the largest producers in the world, partly overlapping with OPEC but also including Brazil and Argentina. Groupings aside, global investments in new oil and gas supplied are well and truly on a rise despite the transition push. Goldman Sachs reported last month that there were currently 70 large-scale oil and gas projects under development globally right now. That was up by a substantial 25% from 2020, although 2020 could hardly be seen as a normal year for investment decision-making in any industry except perhaps IT. Per the investment bank, the seven-year-long underinvestment period led to a sharp decline in the resource life of future projects as well as the life of already producing fields. With a rebound in investment, this may yet change. Wood Mac, on the other hand, warns of peak demand and a fundamental change in the oil and gas industry driven by the prospect of that. According to upstream analysts Fraser McKay and Ian Thom, the current cycle will not end with a bust as all previous cycles in the industry did. The reason: the prospect of peak oil demand caused by the transition to non-hydrocarbon energy sources. This prospect, they argued, would keep oil and gas producers on their toes and maintain their financial discipline over the longer term. Still, despite the prospect of peak demand, even
Wood Mac analysts are worried about the lack of a spare production capacity cushion, which could be viewed as a side effect of this newly found discipline with spending and focus on efficiency while adjusting to a world in transition.
“We expect companies to go for margin rather than market share; and upstream supply chain capacity to creep rather than leap, which has been the traditional response in an upcycle,” McKay and Thom said, adding “That restraint could lead to a tighter supply chain than the industry has been used to.” While peak demand for oil is something that a lot of forecasters talk about and even call for openly, for now it remains on the horizon while actual demand for oil breaks record after record. Even the
International Energy Agency, a vocal transition advocate and peak oil demand forecaster said that over the short-term demand is going to grow, hitting a record of over 102 million barrels daily this year.
This makes the global balance between supply and demand perhaps a bit more precarious than the Wood Mac analysis suggests. While it’s true that technological gains have played an important role in keeping production high while reducing costs, U.S. shale drillers have steered clear of their previous setting of “growth at all costs”. Meanwhile, OPEC is keeping a lid on output with the novel option for individual members—Saudi Arabia—to cut additional volumes whenever they decide to, in order to push prices higher. And OPEC, in a sense, grew with the BRICS expansion. The oil and gas industry is spending more on new production despite the transition push. This means expectations are that peak oil demand is a relatively distant prospect. It might even become more distant if the transition begins to show signs of exhaustion amid substantial cost inflation and the risks of raw material shortages. NN: this greenieewinie climate change hysteria will spark off a energy cries. The masses need cars to go to work. they need aircon and heat. They need oil based chemicals. Windmils and solar panels cannot shoulder the load. And the energy crises cannot be avoided. It takes years to bring projects on line. The prayer of the climate change nut cases is energy demand will fall faster then oil production. That is a wet dream it will not happen.
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Prospects of reviving the Iran nuclear deal have swung dramatically, from near certain in March 2022 to almost nil by the end of the year and somewhere in the middle currently. Although prospects of a deal being signed any time soon appear dim, relations between Washington and Tehran have warmed up considerably, with the Biden administration unblocking frozen assets and possibly even allowing Iran’s enrichment of uranium. The U.S. administration might not admit it openly, but it has looked the other way and allowed Iran oil sales to hit record highs–obviously happy to keep the markets flooded in a bid to keep oil prices low. Iranian crude exports exceeded 1.5 mb/d in May, the highest level since 2018 despite the country still being under U.S. sanctions. Israel’s Haaretz newspaper reported that the talks are moving forward more rapidly than expected, with the possibility of a deal being struck in a matter of weeks. Deal terms are likely to include Iran ceasing its 60% and higher uranium enrichment activities in return for permission to export as much as 1M bbl/day of oil.
Iran’s current production is considerably lower than the 2018 peak at 3.7 mb/d. Boosting production from the current level to anywhere close to 6mb/d could, however, take several years at the very least due to years of underinvestment.