August 9, 2023
Below are key insights about how supply-side dynamics for global oil and natural gas markets are affecting the prices of the main energy commodities.
Crude Oil
U.S Crude oil production in decreasing trend – WTI trades on 3-month level
- U.S. crude oil production reported lower in four consecutive weeks, throughout July, sending WTI prices soaring more than +17.2% on a monthly basis.
- From 12,400k bpd at the end of June, the U.S. crude oil production fell to 12,200k bpd in July, resulting in a 200k bpd deficit, driven by decreased Oil Rigs from 545 in June to 529 in July.
- This was the first 4-week streak of declines in crude oil production since the beginning of the Covid-19 pandemic in March 2020 and the imposition of lockdowns globally.
- Saudi Arabia and Russia will continue to add more pressure to the supply side. Saudi Arabia extends its 1m bpd production cut for another month, while Russia said it will also reduce its oil exports by 300,000 bpd in September.
- On the demand side, concerns about a subdued recovery in China and most European countries continued to weigh on sentiment.
Gasoline
Increased Gasoline production put an end to soaring Gasoline futures
- Finished Motor Gasoline production is close to a 10-week high, leading RBOB Gasoline prices to retreat below $2.8/gallon, driven by oversupply concerns from traders.
- Finished Motor Gasoline production increased for 3 weeks in a row, from 9,656k bpd on July 7th to 9,904k bpd on July 28th, while the RBOB gasoline futures soared more than +14.1% in the same time span.
- The U.S. national average for a gallon of gas has continued its summer U-turn, up 1 cent since last week to $3.82. Pump prices have primarily risen due to the price of oil, which was near $80 per barrel last week, but has since softened recently, according to American Automobile Association (AAA).
- China’s gasoline demand is set to peak in 2023, two years earlier than expected, following the rapid adoption of new-energy vehicles, according to Sinopec (the nation’s largest fuel distributor and seller)
Natural Gas
Natural Gas prices surge due to heat, while US supply increases
- U.S. natural gas futures surged past $2.7 per MMBtu, marking their highest point in nearly a fortnight. This upswing is propelled by the anticipation of heightened demand for air conditioning.
- Meteorological projections indicate that the prevailing heatwave is poised to continue until at least August 19. This prognosis has spurred investors to foresee increased consumption. Texas, in particular, is on track to witness an unprecedented surge in power demand this week, building on the already-record peak from the previous week.
- Simultaneously, the flow of natural gas to U.S. liquefied natural gas (LNG) export facilities has been diminishing thus far in August. This decrease is primarily attributed to reduced production output at Cheniere Energy’s Sabine Pass facility in Louisiana. This dynamic has bolstered the availability of domestic gas. Moreover, average gas production reached 102.2 billion cubic feet per day (bcfd) in August, surpassing July’s 101.8 bcfd and aligning with the monthly record set in May.