Oil Price Rally Stalls On Large Crude Build

https://oilprice.com/Latest-Energy-News/World-News/Oil-Price-Rally-Stalls-On-Large-Crude-Build.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1606256938&_p_c=1

The American Petroleum Institute (API) reported on Tuesday a build in crude oil inventories of 3.8 million barrels for the week ending November 20.

Analysts had predicted an inventory build of just 127,000 barrels, and for the short price run due to favorable covid-10 vaccine news over the last week or so, it likely means curtains. 

In the previous week, the API reported a build in oil inventories of 4.174-million barrels, after analysts had predicted a build of 1.95 million barrels for the week.

Oil prices were trading up on Tuesday afternoon before the API's data release on another round of positive vaccine news. While the threat of lower oil demand still looms large over the markets in general, back-to-back announcements by pharmaceutical companies—including Moderna and AstraZeneca, which are part of U.S. President Trump's Operation Warp Speed. The results show a high degree of efficacy for multiple vaccine candidates. 

In the run-up to Tuesday's data release, at 2:45 p.m. EDT, WTI had risen by $1.82 (+4.23%) to $44.88, up roughly $4 per barrel on the week. The Brent crude benchmark had risen on the day by $1.74 at that time (+3.78%) to $47.80—up about $4.50 per barrel on the week. 

U.S. oil production was up for the week ending November 13, at 10.9 million bpd, according to the Energy Information Administration—2.2 million bpd lower than the all-time high of 13.1 million bpd reached in March. 

The API reported a build in gasoline inventories of 1.3 million barrels of gasoline for the week ending November 20—compared to the previous week's 256,000-barrel build. Analysts had expected a 614,000-barrel build for the week. 

Distillate inventories were down by 1.8-million barrels for the week, compared to last week's 5.024-million-barrel draw, while Cushing inventories fell by 1.4 million barrels.

U.S. Crude Oil Inventories

  Latest Release    Nov 18, 2020    Actual  0.768M   Forecast  1.650M  Previous  4.278M    

U.S. Crude Oil Inventories

    https://www.investing.com/economic-calendar/eia-crude-oil-inventories-75    

Crude 3 month chart

Crude 1 year chart below

Crude 5 year chart below

Crude 10 year chart below

Unleaded Gasoline Price Charts:

3 month                 

1 Year                

5 year........are we headed back to the highs?

10 Year                

               https://www.investing.com/economic-calendar/eia-crude-oil-inventories-75

U.S. Crude Oil Inventories

     Latest Release   Nov 25, 2020    Actual-0.754M    Forecast0.127M    Previous0.768M                                                                       

OPEC reaches consensus to extend oil cuts by three months, Algeria says

https://www.oilandgas360.com/opec-reaches-consensus-to-extend-oil-cuts-by-three-months-algeria-says/

Algerian Energy Minister Abdelmadjid Attar, holder of OPEC’s rotating presidency, was speaking shortly before OPEC ministers began talks to discuss a policy that would help producers cope with weak demand in 2021 due to the coronavirus crisis.

“There is consensus at the OPEC level … on extending the current 7.7 million barrels per day (bpd) cuts until … the end of March,” Attar said, according to Algeria’s state news agency.

The Organization of the Petroleum Exporting Countries, Russia and others, a group known as OPEC+, hold their wider talks on Tuesday, after informal discussions of key ministers on Sunday had failed to reach a consensus.

OPEC+ had been due to ease existing production cuts by 2 million bpd from January. But, with demand still under pressure, OPEC+ has been considering extending existing cuts of 7.7 million bpd, about 8% of global demand, into the first months of 2021, a position backed by Saudi Arabia, sources said.

After Sunday’s consultations failed to reach agreement, sources said the group was also considering increasing output gradually from January, a position Russia backs.

“OPEC will probably agree to extend the current production ceiling for the first quarter of 2021, if the non-OPEC countries agree with it in (Tuesday’s) meeting,” an OPEC source said

Kremlin spokesman Dmitry Peskov said differences between Russia and OPEC were not as severe as in early 2020, when disagreements led to a collapse in talks and a surge in output.

But Peskov said President Vladimir Putin had no plans to call Saudi Arabia’s leadership before the OPEC+ meeting, a move that in the past has helped smooth over any dispute.

OPEC+ has to strike a delicate balance of pushing up prices enough to help their budgets but not so much that rival U.S. output surges. U.S. shale production tends to climb as prices rise above $50 a barrel. Adding to the challenge within OPEC+, Moscow’s finances can tolerate lower oil prices than Riyadh’s.

Oil prices, which were down 0.5% around $48 by 1405 GMT, could fall as much as 10% if OPEC failed to roll over cuts, Deutsche Bank said in a note.

Oil had a bull run last week triggered by hopes for a virus vaccine and expectations of a rollover in OPEC+ cuts.

(Graphic: OPEC+ Scenarios and Impact on Oil Inventories )

Biden plan to end U.S. fossil fuel subsidies faces big challenges

https://www.oilandgas360.com/biden-plan-to-end-u-s-fossil-fuel-subsidies-faces-big-challenges/

The challenge reflects just one of the obstacles that Biden will need to overcome as he seeks to usher in sweeping measures to combat climate change and transform the nation’s economy to net-zero emissions within three decades. Biden has said axing fossil fuel subsidies will generate money to help pay for his broader $2 trillion climate plan.

While Biden can take executive action to reverse President Donald Trump’s rollbacks of rules meant to reduce greenhouse gas emissions, reforming tax breaks that allow companies to produce oil, gas and coal more cheaply will require Congress to pass legislation.

Doing so could be hard, even though Biden spent 36 years in the Senate where he is known as a dealmaker.

“It’s dead on arrival in the Senate,” said Gilbert Metcalf, a former deputy assistant secretary for environment and energy at the Treasury Department under former President Barack Obama, referring to any standalone legislation ditching the tax breaks if Republicans maintain control of the chamber.

Even if two of Biden’s fellow Democrats win runoff votes in Georgia on Jan. 5, bringing the Senate to a 50-50 split with Vice President-elect Kamala Harris acting as tie breaker, chances of passing a tax package are slim, experts said.

That is because moderate Democrats from fossil fuel producing states, like Senators Martin Heinrich of New Mexico and Joe Manchin of West Virginia, the top Democrat on the Senate Energy Committee, could stymie the effort.

“In states like New Mexico, where senators might be green enough to support a climate bill … a measure that merely strips tax provisions looks like a non-starter,” said Kevin Book, an analyst at ClearView Energy Partners.

Neither Manchin’s office, nor Heinrich’s responded to requests for comment.

Obama also wanted to ditch tax breaks for fossil fuels to send a signal to the world that the United States was serious about speeding a transition away from fossil fuels to tackle climate change.

But even with a commanding Democratic majority in the Senate in Obama’s first six years in office, he was unable to kill the subsidies.

The Biden transition team did not respond to a request for comment.

A GLOBAL SIGNAL?

Doing away with tax breaks on producers of fuels that emit greenhouse gases would fit neatly with Biden’s pro-climate agenda, which marks a reversal from Trump’s efforts to roll back climate regulations while boosting fossil fuel output.

It would help establish the United States as a global leader on climate, potentially helping convince other big emitters to axe fossil fuel subsidies.

Leaders in the G20 resolved in 2009 to ditch the subsidies but have made little progress.

“It’s harder for us to get a country to do something if we’re not doing it ourselves,” said Metcalf.

Estimates of the value of fossil fuel subsidies, which mainly take the form of tax breaks, vary.

Bob McNally, the president of the consultancy Rapidan Energy Group, estimates they run $15 billion a year. The nonprofit Environmental and Energy Study Institute puts them at $20 billion annually.

Estimates that consider the health care costs linked to pollution from fossil fuels put the subsidies even higher.

metmike: This is false.  Fossil fuels are one of the biggest reasons for the increased life expectancy in the developed countries. CO2 is a beneficial gas for life and the building block for all of life. The beneficial increase in CO2 is greening up the planet:  https://www.nasa.gov/feature/goddard/2016/carbon-dioxide-fertilization-greening-earth

"One U.S. tax break, called intangible drilling costs, allows producers to deduct a majority of their costs from drilling new wells. The Joint Committee on Taxation, a nonpartisan panel of Congress, has estimated that ditching it could generate $13 billion for the public coffers over 10 years.

Another, the percentage depletion tax break which allows independent producers to recover development costs of declining oil gas and coal reserves, could generate about $12.9 billion in revenue over 10 years, according to the panel.

Biden and Congress will be under pressure to reduce the federal deficit by cutting such tax breaks. But wider tax reforms will also take up debate such as corporate tax rates and boosting taxes on the biggest earners, some of which might take priority.

Any bill to alter the tax provisions for the fossil fuel sector will also face heavy resistance from lobbyists, some of whom may point out that solar, wind and other non-fossil energy sources also receive substantial taxpayer support.

The American Petroleum Institute, the country’s biggest oil and gas lobby group, will “advocate for a tax code that supports a level playing field for all companies regardless of economic sector,” said Frank Macchiarola, a senior vice president at the industry group.

API will push for “pro-development policies that sustain and grow the billions of dollars in government revenue our industry generates at the state and federal level,” he said."

Oil prices inch down as OPEC and allies seek consensus on output

https://www.oilandgas360.com/oil-prices-inch-down-as-opec-and-allies-seek-consensus-on-output/

LONDON – Oil prices inched down on Tuesday as investors awaited direction from OPEC and its allies after the producers postponed a formal meeting to decide whether to lift output from January.

The Organization of the Petroleum Exporting Countries, Russia and other allies, a group known as OPEC+, delayed talks on next year’s output policy to Thursday from Tuesday, as the main players had yet to agree, sources said.

“It is not entirely clear whether it is good news — the will is there to come up with a solution — or bad — one step closer to a fall-out — but the market is not panicking just yet,” PVM analysts said.

The group was due to ease current production cuts by 2 million barrels per day (bpd) from January.

With demand still weak, OPEC+ has been considering extending current cuts into the first months of 2021, a position backed by de facto OPEC leader Saudi Arabia, sources say. Russia, meanwhile, backs a gradual increase.

“The group will probably find some face-saving compromise, with a short extension being the most likely outcome followed by a phased production return,” said Helima Croft at Royal Bank of Canada.

“Nonetheless this latest fracas does not bode well for collective cohesion in 2021 as vaccine optimism abounds and producers anticipate a strong recovery,” Croft added.

A Reuters poll of 40 economists and analysts forecast Brent would average $49.35 a barrel next year.

https://www.investing.com/economic-calendar/api-weekly-crude-stock-656

U.S. API Weekly Crude Oil Stock     

     Latest Release    Dec 01, 2020     Actual   4.146M    Forecast -2.272M    Previous   3.800MThe American Petroleum Institute reports inventory levels of US crude oil, gasoline and distillates stocks. The figure shows how much oil and product is available in storage.The indicator gives an overview of US petroleum demand.

Current gas prices. 

https://www.gasbuddy.com/GasPriceMap?z=4&lng=-96.591588&lat=38.822395

Why are west coast gasoline prices higher?

https://www.quora.com/Why-are-west-coast-gasoline-prices-higher

EIA reports a smaller-than-expected decline in weekly U.S. crude supplies

https://www.marketwatch.com/story/eia-reports-a-smaller-than-expected-decline-in-weekly-us-crude-supplies-2020-12-02

The Energy Information Administration reported Wednesday that U.S. crude inventories fell by 700,000 barrels for the week ended Nov. 27. That compared with the decline of 1.7 million barrels forecast by IHS Markit. The American Petroleum Institute on Tuesday, however, reported a 4.15 million-barrel climb, according to sources. The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged down by 300,000 barrels for the week. Gasoline supply, meanwhile, climbed by 3.5 million barrels, while distillate stockpiles were up by 3.2 million barrels. IHS Markit had forecast supply climbs of 2 million barrels for gasoline and 100,000 barrels for distillates. January West Texas Intermediate crude         CLF21,        2.18%       was up 40 cents, or 0.9%, at $44.95 a barrel on the New York Mercantile Exchange. Prices traded at $44.84 before the supply data.

U.S. Crude Oil Inventories

     Latest Release  Dec 02, 2020   Actual-0.679M   Forecast-2.358M   Previous-0.754M                                                                                           https://www.investing.com/economic-calendar/eia-crude-oil-inventories-75                                                                                                                                                  

Traders Haven’t Been This Bullish On Oil Since August

https://oilprice.com/Energy/Crude-Oil/Traders-Havent-Been-This-Bullish-On-Oil-Since-August.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1606942974&_p_c=1

Since pharmaceutical companies started announcing vaccine breakthroughs three weeks ago, the oil market has seen the gloom from the soaring coronavirus cases turn into optimism that vaccine availability would help global economic recovery and a rebound in oil demand at some point next year.

Hedge funds and other money managers have been net buyers of the most important petroleum futures and contracts since November 9, when Pfizer and BioNTech started the race to take vaccines to approval within weeks and to people within months.   

At the end of the most recent reporting week to November 24, portfolio managers held the most bullish overall position in oil in three months—since the end of August, suggesting that the market hopes that vaccines will help global oil demand.  

The overall net long position—the difference between bullish and bearish bets—in futures and options in the six most important petroleum contracts was equivalent to 617 million barrels on November 24, according to data from exchanges compiled by Reuters market analyst John Kemp.

That’s the most bullish net long position in oil held by money managers since the end of August, just before the second COVID-19 wave swept through the United States and major economies in Europe, forcing renewed lockdowns and curfews in the biggest European economies Germany, UK, France, Italy, and Spain, to name a few.

Despite the gloomy outlook for oil in the nearest term because of the virus and continued restrictions in major economies, the oil market has been looking a few months further down the road since vaccine announcements started giving hope to speculators that some form of normality of life and travel could return after the middle of 2021.   

The question now is: how much of that hope has been already priced into the recent oil rally over the past three weeks, considering that the actual direct correlation of mass vaccination on oil demand is likely to manifest itself in the second half of 2021, at the earliest.

Hope could sustain oil prices through the first half of 2021, but the market will also have to look at the supply-demand picture, which is less rosy, especially if OPEC+ doesn’t deliver the expected extension of the current oil production cuts. At the time of writing early on Wednesday, OPEC and OPEC+ had adjourned talks about the future of the cuts until Thursday as disagreements persist.

In the week to November 24, money managers boosted their bullish bets on WTI Crude and Brent Crude by 67,000 lots to 542,000 lots—a three and a half-month high. Some of the 183,000 bullish lots added since the first vaccine announcement on November 9 “could be at risk should OPEC+ unexpectedly fail to deliver a cut extension,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said on Tuesday.

Beyond the OPEC+ group’s immediate decision, oil prices and the mood on the market will also be dictated by the alliance’s decisions all throughout 2021, as well as supply and demand issues.

On the supply side, the risks are skewed to the downside, with oil production from Libya—exempted from the OPEC+ cuts—surging, and Norway ending its oil cuts at the end of this year and adding 134,000 bpd to global oil supply as of January 1.

On the demand side, vaccines could boost oil demand in the latter half of 2021, but a weaker rebound in demand early next year because of the second COVID wave could slow down the drawing down of oil and product inventories which, at least in the United States, are still above the most recent five-year averages.

The speculative positioning in the oil market may look like the most bullish it has been since before the second coronavirus wave, but the vaccine hope rally may have been a bit premature.    

Will Falling Drilling Costs Fuel A U.S. Shale Rebound?

https://oilprice.com/Energy/Energy-General/Will-Falling-Drilling-Costs-Fuel-A-US-Shale-Rebound.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1607041915&_p_c=1

Even though the U.S. shale patch has further reduced its break-evens over the past year, the decline in drilling costs alone may not be sufficient to help producers to lift production after this year’s downturn, BloombergNEF (BNEF) said in a new report.

Oil firms in America are currently under pressure from investors to turn in profits and return part of those profits to shareholders, prioritizing value for investors to volumes in production. All companies, from the smallest driller to the largest corporations, have reduced capital spending this year in response to the collapse in oil prices, and they will continue to show discipline in spending next year amid the uncertain recovery of oil demand and oil prices. In addition, the COVID-inflicted crisis accelerated bankruptcies across the U.S. shale patch, with more filings expected in the coming months.

According to BNEF’s report, exploration and production companies operating in the lowest-cost U.S. basin, Delaware in the Permian, can now profitably drill a well at an oil price of $33 a barrel, down from a $40 per barrel break-even last year.

“Contract renegotiations, ongoing efficiency gains and process improvements have allowed the oil industry to slash the cost to drill and complete a well,” the BNEF report said.

WTI Crude prices in the range $35 to $45 next year would keep crude oil production flat in the four major oil plays in the United States, according to the report. 

The Q3 Dallas Energy Survey from end-September showed that most executives from 154 oil and gas firms—66 percent—believe U.S. oil production has peaked.  

Total U.S. crude oil production is set to remain close to its current levels of around 11 million barrels per day (bpd) through the end of 2021, as new drilling activity will not be enough to offset declines from existing wells, the Energy Information Administration (EIA) said last month. 

Oil Rig Count Rises To Highest Level Since Mid-May

https://oilprice.com/Energy/Energy-General/Oil-Rig-Count-Rises-To-Highest-Level-Since-Mid-May.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1607118572&_p_c=1

Baker Hughes reported on Friday that the number of oil rigs in the United States rose by 5 to 246—the highest number of rigs since mid-May.

The total number of active oil and gas rigs increased for the week by 3, with oil rigs increasing by 5 and gas rigs falling by 2. Miscellaneous rigs stayed the same at 2.

Total oil and gas rigs in the United States are now down by 476 compared to this time last year.

The EIA’s estimate for oil production in the United States is now at 11.1 million barrels of oil per day as of the most recent reporting period, with U.S. production still rangebound between 9.7 million bpd and 11.1 million bpd for months.

Canada’s overall rig count stayed the same this week. Oil and gas rigs in Canada are now at 102 active rigs, and down 36 year on year. 

Basins that saw gains this week include the Permian (+3), DJ-Niobrara (+2), and Utica (+1). The Marcellus basin saw the only decrease of two rigs.  The Permian basin is now 236 rigs down on the year.

Check back later today for the Frac Spread Count by Primary Vision.

WTI and Brent were both trading up on Friday before the rig count on positive sentiment surrounding Covid-19 vaccine candidates and Thursday’s OPEC+ agreement that settled the issue of January 2021 quotas after a week of uncertainty.

Oil moves up towards $50/barrel after OPEC+ supply compromise

https://www.oilandgas360.com/oil-moves-up-towards-50-barrel-after-opec-supply-compromise/

OPEC and Russia on Thursday agreed to ease deep oil output cuts from January by 500,000 barrels per day with further as yet undefined increases on a monthly basis, failing to reach a compromise on a broader policy for the rest of 2021.

OPEC+ had been expected to continue existing cuts until at least March, after backing down from plans to raise output by 2 million bpd.

The increase means the Organization of the Petroleum Exporting Countries (OPEC) and Russia, a group known as OPEC+, are set to reduce production by 7.2 million bpd, or 7% of global demand from January, compared with current cuts of 7.7 million bpd.

While some analysts saw an undersupplied oil market even under the new higher supply quotas, others expected the barrels would tip the market into oversupply. Wood Mackenzie analysts, for example, expect that if the increases continue through March there might be 1.6 million unwanted bpd in the first quarter.

Also supporting prices, a bipartisan $908 billion coronavirus aid plan gained momentum in the U.S. Congress on Thursday.