Coal – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Coal

  • U.S. coal exports for the first nine months of 2018 totaled 87 million short tons (MMst), compared with 69 MMst exported during the same period in 2017. In July and September 2018, exports of steam coal (used for generating electricity) exceeded exports of metallurgical coal (used for producing steel). Before July 2018, the last month that this occurred was in February 2015. EIA expects coal exports to total 113 MMst in 2018 and 102 MMst in 2019. EIA expects U.S. coal production will total 762 MMst in 2018 (down 2% from 2017) and 742 MMst in 2019 (down 3% from 2018).
U.S. coal production
U.S. electric power sector coal stocks
U.S. coal consumption

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas, Uncategorized | Tagged , , , , , , , , , , , | Leave a comment

Natural Gas – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Natural Gas

  • The Henry Hub natural gas spot price averaged $4.15/million British thermal units (MMBtu) in November, up $0.87/MMBtu from the October average. Cold temperatures and low inventory levels contributed to the increase in price. Despite low inventory levels, EIA expects strong growth in U.S. natural gas production to put downward pressure on prices in 2019. EIA expects Henry Hub natural gas spot prices to average $3.11/MMBtu in 2019, down 6 cents from the 2018 average and down from a forecast average price of $3.88/MMBtu in the fourth quarter of 2018. NYMEX futures and options contract values for March 2019 delivery traded during the five-day period ending December 6, 2018, suggest a range of $1.85/MMBtu to $8.37/MMBtu encompasses the market expectation for March Henry Hub natural gas prices at the 95% confidence level.
  • EIA estimates that U.S. natural gas storage inventories were 3.0 trillion cubic feet (Tcf) at the end of November, which was 19% lower than the five-year (2013–17) average for the end of November.
  • EIA forecasts that dry natural gas production will average 83.3 billion cubic feet per day (Bcf/d) in 2018, up 8.5 Bcf/d from 2017. Both the level and volume growth of natural gas production in 2018 would establish new records. EIA expects natural gas production will continue to rise in 2019 to an average of 90.0 Bcf/d.
U.S. natural gas consumption
U.S. natural gas balance
U.S. marketed natural gas production
U.S. natural gas trade
U.S. working natural gas in storage

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas, Uncategorized | Tagged , , , , , , , , , , , | Leave a comment

U.S. Liquid Fuels – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

U.S. Liquid Fuels

  • EIA expects Brent spot prices will average $61 in 2019 and that West Texas Intermediate (WTI) crude oil prices will average about $7/b lower than Brent prices next year. NYMEX WTI futures and options contract values for March 2019 delivery that traded during the five-day period ending December 6, 2018, suggest a range of $36/b to $77/b encompasses the market expectation for March WTI prices at the 95% confidence level.
  • EIA estimates that U.S. crude oil production averaged 11.5 million barrels per day (b/d) in November, up 150,000 b/d from October levels because of platforms resuming normal operations after hurricane-related outages in October. EIA expects that U.S. crude oil production will average 10.9 million b/d in 2018, up from 9.4 million b/d in 2017, and will average 12.1 million b/d in 2019.
U.S. liquid fuels product supplied growth
U.S. Hydrocarbon gas liquids product supplied growth
U.S. crude oil production
U.S. commercial crude oil stocks
U.S. liquid fuels production growth
U.S. gasoline and distillate inventories

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , | Leave a comment

Global Liquid Fuels – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Global Liquid Fuels

  • Brent crude oil spot prices averaged $65 per barrel (b) in November, down $16/b from October, the largest monthly average price decline since December 2014.
  • EIA expects Brent spot prices will average $61 in 2019 and that West Texas Intermediate (WTI) crude oil prices will average about $7/b lower than Brent prices next year. NYMEX WTI futures and options contract values for March 2019 delivery that traded during the five-day period ending December 6, 2018, suggest a range of $36/b to $77/b encompasses the market expectation for March WTI prices at the 95% confidence level.
  • EIA forecasts total global liquid fuels inventories will increase by about 0.3 million b/d in 2018 and by 0.2 million b/d in 2019. Global liquid fuels production is forecast to increase by 1.4 million b/d in 2019. EIA expects production growth in the United to be partially offset by declining production elsewhere, notably in the Organization of the Petroleum Exporting Countries (OPEC), where EIA forecasts that liquid fuels production will declinesby 0.9 million b/d in 2019. EIA expects global liquid fuels consumption to increase by 1.5 million b/d in 2019, with growth largely coming from China, the United States, and India.
World liquid fuels production and consumption balance
World liquid fuels consumption
World liquid fuels consumption growth
World liquid fuels production and consumption balance
Estimated unplanned crude oil production among OPEC and non-OPEC producers
OPEC surplus crude oil production capacity
OECD commercial stocks of crude oil and other liquids (days of supply)

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , , , | Leave a comment

Prices – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Prices

  • Brent crude oil spot prices averaged $65 per barrel (b) in November, down $16/b from October, the largest monthly average price decline since December 2014.
  • EIA expects Brent spot prices will average $61 in 2019 and that West Texas Intermediate (WTI) crude oil prices will average about $7/b lower than Brent prices next year. NYMEX WTI futures and options contract values for March 2019 delivery that traded during the five-day period ending December 6, 2018, suggest a range of $36/b to $77/b encompasses the market expectation for March WTI prices at the 95% confidence level.
  • The Henry Hub natural gas spot price averaged $4.15/million British thermal units (MMBtu) in November, up $0.87/MMBtu from the October average. Cold temperatures and low inventory levels contributed to the increase in price. Despite low inventory levels, EIA expects strong growth in U.S. natural gas production to put downward pressure on prices in 2019. EIA expects Henry Hub natural gas spot prices to average $3.11/MMBtu in 2019, down 6 cents from the 2018 average and down from a forecast average price of $3.88/MMBtu in the fourth quarter of 2018. NYMEX futures and options contract values for March 2019 delivery traded during the five-day period ending December 6, 2018, suggest a range of $1.85/MMBtu to $8.37/MMBtu encompasses the market expectation for March Henry Hub natural gas prices at the 95% confidence level.
West Texas Intermediate (WTI) crude oil price
U.S. gasoline and crude oil prices
U.S. diesel fuel and crude oil prices
Henry Hub natural gas price
U.S. natural gas prices
U.S. residential electricity price

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , | Leave a comment

Forecast Highlights – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

West Texas Intermediate (WTI) crude oil price

World liquid fuels production and consumption balance
U.S. natural gas prices
U.S. residential electricity price

Forecast Highlights

Global liquid fuels

  • Brent crude oil spot prices averaged $65 per barrel (b) in November, down $16/b from October, the largest monthly average price decline since December 2014.
  • EIA expects Brent spot prices will average $61 in 2019 and that West Texas Intermediate (WTI) crude oil prices will average about $7/b lower than Brent prices next year. NYMEX WTI futures and options contract values for March 2019 delivery that traded during the five-day period ending December 6, 2018, suggest a range of $36/b to $77/b encompasses the market expectation for March WTI prices at the 95% confidence level.
  • EIA estimates that U.S. crude oil production averaged 11.5 million barrels per day (b/d) in November, up 150,000 b/d from October levels because of platforms resuming normal operations after hurricane-related outages in October. EIA expects that U.S. crude oil production will average 10.9 million b/d in 2018, up from 9.4 million b/d in 2017, and will average 12.1 million b/d in 2019.
  • EIA forecasts total global liquid fuels inventories will increase by about 0.3 million b/d in 2018 and by 0.2 million b/d in 2019. Global liquid fuels production is forecast to increase by 1.4 million b/d in 2019. EIA expects production growth in the United States to be partially offset by declining production elsewhere, notably in the Organization of the Petroleum Exporting Countries (OPEC), where EIA forecasts that liquid fuels production will decline by 0.9 million b/d in 2019. EIA expects global liquid fuels consumption to increase by 1.5 million b/d in 2019, with growth largely coming from China, the United States, and India.

Natural Gas

  • The Henry Hub natural gas spot price averaged $4.15/million British thermal units (MMBtu) in November, up $0.87/MMBtu from the October average. Cold temperatures and low inventory levels contributed to the increase in price. Despite low inventory levels, EIA expects strong growth in U.S. natural gas production to put downward pressure on prices in 2019. EIA expects Henry Hub natural gas spot prices to average $3.11/MMBtu in 2019, down 6 cents from the 2018 average and down from a forecast average price of $3.88/MMBtu in the fourth quarter of 2018. NYMEX futures and options contract values for March 2019 delivery traded during the five-day period ending December 6, 2018, suggest a range of $1.85/MMBtu to $8.37/MMBtu encompasses the market expectation for March Henry Hub natural gas prices at the 95% confidence level.
  • EIA estimates that U.S. natural gas storage inventories were 3.0 trillion cubic feet (Tcf) at the end of November, which was 19% lower than the five-year (2013–17) average for the end of November.
  • EIA forecasts that dry natural gas production will average 83.3 billion cubic feet per day (Bcf/d) in 2018, up 8.5 Bcf/d from 2017. Both the level and volume growth of natural gas production in 2018 would establish new records. EIA expects natural gas production will continue to rise in 2019 to an average of 90.0 Bcf/d.

Electricity, coal, renewables, and emissions

  • EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 32% in 2017 to 35% in 2018 and in 2019. EIA forecasts that the electricity generation share from coal will average 28% in 2018 and 26% in 2019, down from 30% in 2017. The nuclear share of generation was 20% in 2017 and EIA forecasts that it will average about 19% in 2018 and in 2019. Wind, solar, and other nonhydropower renewables provided about 10% of electricity generation in 2017. EIA expects them to provide 10% in 2018 and 11% in 2019. The generation share of hydropower was 7% in 2017, and EIA forecasts that it will be about the same in 2018 and in 2019.
  • EIA expects average U.S. solar generation will rise from 212,000 megawatt hours per day (MWh/d) in 2017 to 268,000 MWh/d in 2018 (an increase of 27%) and to 303,000 MWh/d in 2019 (an increase of 13%). In recent years, the industry has seen a shift from fixed-tilt solar PV systems to tracking systems.. Although tracking systems are more expensive than fixed-tilt systems, revenue from the additional electricity generated by following the path of the sun across the sky often exceeds the increased cost.
  • U.S. coal exports for the first nine months of 2018 totaled 87 million short tons (MMst), compared with 69 MMst exported during the same period in 2017. In July and September 2018, exports of steam coal (used for generating electricity) exceeded exports of metallurgical coal (used for producing steel). Before July 2018, the last month that this occurred was in February 2015. EIA expects coal exports to total 113 MMst in 2018 and 102 MMst in 2019. EIA expects U.S. coal production will total 762 MMst in 2018 (down 2% from 2017) and 742 MMst in 2019 (down 3% from 2018).
  • After declining by 0.8% in 2017, EIA forecasts that U.S. energy-related carbon dioxide (CO2) emissions will rise by 3.0% in 2018. This increase largely reflects more natural gas consumption in 2018 for heating during a colder winter and for electric generation to support more cooling during a warmer summer than in 2017. EIA expects emissions to decline by 1.2% in 2019 because it forecasts that temperatures will return to near normal. Energy-related CO2 emissions are sensitive to changes in weather, economic growth, energy prices, and fuel mix.

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , | Leave a comment

Natural Gas Markets – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of December 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Natural Gas

Prices: The front-month natural gas futures contract for delivery at the Henry Hub settled at $2.77/million British thermal units (MMBtu) on September 6, an increase of 1 cent/MMBtu from August 1 (Figure 9). The Henry Hub natural gas spot price averaged $2.96/MMBtu in August, 12 cents/MMBtu higher than in July. Cooling degree days (CDD) in the United States averaged 13% higher than the 10-year (2008–17) average in August, which contributed to high natural gas demand for power generation.

Figure 9: Natural gas front-month futures prices and actual minus historical average HDD and CDD

U.S. natural gas inventory: Natural gas inventories have been low compared with the five-year (2013–17) average during most of 2018. The low inventory levels reflect high residential and commercial consumption in early 2018 and growth in both liquefied natural gas and pipeline exports over the past year. High natural gas use for electric power generation during July and August also likely slowed the pace of inventory injections. EIA estimates that working gas in underground storage at the end of August totaled 2,606 Bcf, which is 577 billion cubic feet (Bcf), or 18%, lower than the five-year average at the end of August.

The end of October is typically considered the end of the natural gas storage injection season, although injections often occur into the first weeks of November. EIA forecasts that inventories will rise to 3,308 Bcf at the end of October, which would be the lowest end-of-October natural gas inventory level since 2005 (Figure 10). Despite low inventory levels, price increases have been moderate. Significant month-over-month production growth in 2018 helped keep futures prices lower than $3/MMBtu for most of the summer. Total U.S. dry natural gas production reached an estimated 82.2 billion cubic feet per day in August. Implied volatility, which is based on futures and options, has also remained low, indicating lower expectations by market participants for large price increases in the near future.

Figure 10: Increase in U.S. natural gas inventory from August to October

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , , | Leave a comment

Petroleum Products – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of September 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Petroleum Products

Gasoline prices: The front-month futures price of reformulated blendstock for oxygenate blending (RBOB, the petroleum component of gasoline used in many parts of the country) settled at $1.95 per gallon (gal) on September 6 (Figure 5), a decrease of 9 cents/gal from August 1. The RBOB–Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) decreased by 19 cents/gal to settle at 13 cents/gal during the same period. The RBOB–Brent crack spread declined for most of August and then fell further at the beginning of September, when the front-month contract rolled to October delivery, which reflects winter-grade gasoline that is cheaper for refineries to produce.

Figure 5: Historical RBOB front-month futures prices and crack spread

U.S. motor gasoline inventories: For the four weeks ending August 31, finished motor gasoline production averaged slightly higher than the August 2017 monthly average. Consumption including exports, however, declined from last year’s record high for August to an estimated 10.3 million barrels per day (b/d) in August 2018. The higher production and lower consumption (including exports) resulted in a rare increase in total motor gasoline inventories for the month of August (Figure 6). Total motor gasoline inventories ended the month slightly higher than the top of the five-year (2013–17) range for August.

Figure 6: Change in August U.S. gasoline inventories

Ultra-low sulfur diesel prices: The front-month futures price of ultra-low sulfur diesel (ULSD) settled at $2.21/gal on September 6 (Figure 7), an increase of 11 cents/gal from August 1. The ULSD–Brent crack spread (the difference between the price of ULSD and the price of Brent crude oil) rose by 1 cent/gal to settle at 39 cents/gal during the same period. ULSD crack spreads were at or higher than the five-year average in August in the United States and also in major international trading hubs such as Northwest Europe and Singapore. Strong global economic growth has contributed to higher demand for distillate fuel for much of the past year. In addition, a fire and temporary shutdown of Brazil’s largest refinery in late August resulted in Petrobras, Brazil’s national oil company, purchasing several distillate cargoes from the United States, which also contributed to higher ULSD crack spreads.

Figure 7: Historical ULSD front-month futures price and crack spread

U.S. distillate inventories: In the United States, distillate consumption during the first five months of 2018 was the highest since 2007, which helped to pull inventories below the five-year range in May (Figure 8). Since May, however, U.S. consumption including exports of distillate have shown year-on-year declines largely because of lower export growth. Refinery distillate production in June reached a record high for the month, and weekly estimates indicate similar record production levels for July and August, if confirmed in monthly data. The high production levels and lower consumption (including exports) levels contributed to inventory builds in each of the past three months that were higher than the five-year average, bringing distillate inventories back into the five-year range by the end of August.

The disruption at the Brazilian refinery, which has restarted at reduced operating rates, may provide some additional demand for distillate exports from the United States in the near term, but whether the recent slowdown in U.S. distillate exports is temporary or whether it indicates a longer-term slowing of trade flows is unclear.

Figure 8: U.S. distillate inventory

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , , | Leave a comment

Crude Oil – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of September 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Crude Oil

Prices: The front-month futures price for Brent crude oil settled at $76.50 per barrel (b) on September 6, an increase of $4.11/b from August 1. The front-month futures price for West Texas Intermediate (WTI) crude oil for delivery at Cushing, Oklahoma, increased by 11 cents/b during the same period, settling at $67.77/b on September 6 (Figure 1).

Figure 1: Crude oil front-month futures prices

Although crude oil prices were up for August as a whole, crude oil prices and prices for commodities more broadly fell in early August. Significant declines in some emerging market currencies may have contributed to increased concerns about global economic growth and its potential impact on oil demand. However, oil prices rose in the second half of August following reports of reduced purchases of Iranian crude oil ahead of the United States reinstituting sanctions on Iran in November. Other supply developments likely contributed to a pull on oil inventories, which contributed to higher prices. A restart to some Canadian production after July’s oil sands outage is anticipated to be delayed until September, and tropical storm activity in the U.S. Gulf of Mexico led to the shutdown of some offshore crude oil platforms. EIA estimates that global petroleum inventories declined by almost 0.4 million barrels per day (b/d) in August, the seventh consecutive month of net inventory withdrawals.

Apparent hedging activity in the crude oil options market suggests several market participants purchased financial protection in anticipation of an increase in crude oil prices ahead of the November implementation of Iranian sanctions. Call options for the December 2018 Brent crude oil futures contract with a strike price of $80/b have been one of the most actively traded out-of-the-money contracts in recent months. A call option—which gives the buyer the right, but not the obligation, to purchase an underlying security at a specific price by a certain time—is out-of-the-money when the strike price of the option is higher than the price that the futures contract is currently trading.

Trading volume averaged more than 2,000 contracts per day since May, and trading of 10,000 or more contracts occurred on some days in July and August (Figure 2). Third-party ship tracking data indicate that several countries may have already reduced purchases of Iranian crude oil, and August estimates of waterborne crude oil exports from Iran to be 19% lower than the average during first seven months of 2018. EIA estimates that Iranian crude oil production declined 0.2 million b/d from July to August. If the reduction in Iranian crude oil production and exports is larger than expected, the disruption to the crude oil market in the fourth quarter of 2018 could result in price increases. End users could be financially hedging against this outcome through the purchase of call options, which gain in value as the underlying security price increases, among other factors.

Figure 2: Daily trading volume for the Brent December 2018 $80/b strike call option

Crude oil price spreads: Crude oil prices in the Permian region of Texas and New Mexico traded at wide differentials to those on the U.S. Gulf Coast in August. The WTI-Midland differential to Magellan East Houston reached a low of -$23.95/b on September 4 before settling at -$22.45/b on September 6 (Figure 3). The wide differential between Permian region prices and the Houston prices is the result of constrained pipeline capacity to move crude oil along that route, which has caused producers without pipeline space to ship crude oil using more costly modes of transportion, such as trucks. In additon to this capacity constraint, the differential in August could have been exacerbated by a fire near a storage tank that feeds the Basin Pipeline, which runs from the Permian to Cushing, Oklahoma. The fire disrupted an estimated 50,000 b/d of flow, more than 10% of the pipeline’s total capacity. Although the disruption was brief, prices in Midland declined $2.15/b compared with Magellan East Houston prices on the day of the fire.

Figure 3: WTI Midland minus Magellan East Houston price spread

EIA’s August Drilling Productivity Report estimates that crude oil production in the Permian region will grow to 3.4 million b/d in September. Current estimates of available regional refinery intake and pipeline takeaway capacity is about 3.6 million b/d. Even though crude oil takeaway infrastructure constraints could contribute to wide price discounts for Permian crude oil through the third quarter of 2019, which would moderate production growth compared with an unconstrained scenario, EIA still expects Permian crude oil production to drive total U.S. production growth next year. Many producers in the region claim they can operate profitably with prices in the mid-$50/b level, and they might use higher cost transportation options to move crude oil to the U.S. Gulf Coast or other regions. Some producers with a geographically diverse portfolio of upstream properties could also redirect capital to other areas or decide to reduce completion activity until the transportation constraints ease.

Open interest: Brent and WTI average daily open interest declined for the third consecutive month in August. Both crude oil futures contracts’ open interest reached an all-time high in May 2018, averaging 2.6 million and 2.7 million contracts outstanding, respectively (Figure 4). Since peaking in May, average daily open interest declined to 2.3 million contracts for both Brent and WTI crude oil in August.

Based on the weekly U.S. Commodity Futures Trading Commission (CFTC) Commitments of Traders data, WTI futures open interest declined from the first week of May to the last week of August as a result of the closure of short positions from the Producers and Merchants category, followed by short position closures from Swap Dealers. Producers and Merchants reduced the largest number of long positions, followed by the Other Reportables category. The Producers and Merchants category, along with Swap Dealers, typically represent participants in the futures market whose primary purpose is risk management in the production or processing of a commodity. Fewer futures contracts held by these traders suggest some producers or end users could be reducing their hedgingactivity.

Figure 4: Average daily open interest in Brent and WTI futures contracts

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

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Notable Forecast Changes – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues with its weekly series providing the Short-Term Energy Outlook as of September 11, 2018.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives.

Notable Forecast Changes

  • EIA forecasts that U.S. crude oil production will average 11.5 million barrels per day (b/d) in 2019, which is 0.2 million b/d lower than forecast in the August STEO. The lower production reflects more severe constraints in Permian region pipeline takeaway capacity than previously expected, which results in slower expected crude oil production growth in that region. The lower forecast is also the result of a reevaluation of projects in the U.S. Gulf of Mexico. EIA now expects production in that region to proceed at a slightly slower pace than previously assumed.
  • EIA forecasts Brent crude oil prices to average $74 per barrel (b) and West Texas Intermediate (WTI) crude oil prices to average more than $67/b in 2019. Both of these forecasts are $3/b higher than the forecast from the August STEO. The higher price forecast reflects a lower forecast for global oil supply in 2019 based on lower expected production from the United States, Canada, and OPEC noncrude oil liquids. The lower production forecast is only partially offset by lower forecast oil demand for next year. EIA expects global oil inventories to rise by about 0.1 million b/d next year, which is 0.2 million b/d lower than previously forecast.
  • EIA expects U.S. coal exports to be 107 million short tons (MMst) in 2018 and 101 MMst in 2019, which are 5 MMst and 4 MMst higher, respectively, than expected in the August STEO. The higher forecast reflects the incorporation of higher than expected exports during the first half of 2018, which has raised the base for the rest of the forecast period.
  • EIA uses IHS Markit to provide history and forecasts for macroeconomic data in STEO. Beginning with this forecast, IHS Markit incorporated revised historical data and rebased 2012-dollar concepts from the Bureau of Economic Analysis comprehensive revisions. Therefore, national income accounting variables are now stated in 2012 dollars instead of in 2009 dollars as reported in the previous STEO. This change results in a level shift upward for several of the macroeconomic variables reported in STEO, most notably U.S. gross domestic product (GDP). In this forecast, GDP is forecast to average $18.6 trillion in 2018 and $19.1 trillion in 2019, compared with $17.6 trillion and $18.1 trillion, respectively, for those years in the August STEO.

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

Posted in CO2, Community Improvement, Consulting, Crude Oil, Crude Oil Prices, Drilling, Electricity, Electricity Prices, Emmissions, Energy, Energy Consumption, Energy Deregulation, Energy Prices, Environment, Fuel, Fuels, Gas, Generation, Natural Gas, Natural Gas Prices, OECD, Oil, Press Releases, Services, Shale Gas | Tagged , , , , , , , , , , , , , | Leave a comment