Electricity – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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

Electricity

  • EIA expects the share of total U.S. utility-scale electricity generation from natural gas will average about 32% in 2017, down from 34% in 2016 as a result of higher natural gas fuel costs and increased generation from renewable energy sources. EIA projects the 2017 share of generation from coal will average 30%, about the same as last year. The forecast 2018 generation shares for natural gas and coal remain relatively unchanged from 2017, averaging 32% and 31%, respectively. Generation from renewable energy sources other than hydropower grows from about 8% in 2016 to a forecast share of nearly 10% in 2018. Nuclear power’s forecast share of total electricity generation averages about 20% in both 2017 and 2018, similar to its 2016 level.
  • U.S. wind electricity generating capacity at the end of 2016 totaled 81 gigawatts (GW). EIA expects wind capacity additions in the forecast to raise total wind capacity to 88 GW by the end of 2017 and to 96 GW by the end of 2018.
  • Total U.S. utility-scale solar electricity generating capacity at the end of 2016 was 22 GW. EIA expects solar capacity additions will bring total utility-scale solar capacity to 27 GW by the end of 2017 and to 30 GW by the end of 2018.

chart (4) chart (3) chart (5)

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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Coal – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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 live

Coal

  • Estimated U.S. coal production for the first 11 months of 2017 is 719 million short tons (MMst), 54 MMst (8%) higher than production for the same period in 2016. Annual production is expected to be 791 MMst in 2017, falling to 771 MMst in 2018 because of lower exports and no growth in coal consumption.
  • U.S. coal exports for the first three quarters of 2017 were 69 MMst, 68% (28 MMst) higher than exports for the same period in 2016. This total for the first three quarters of 2017 is already 14% (8 MMst) higher than total annual coal exports in 2016. EIA expects that exports will total 89 MMst in 2017 and 74 MMst in 2018.

chart (1) chart chart (2)

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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Natural Gas – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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. dry natural gas production is forecast to average 73.5 billion cubic feet per day (Bcf/d) in 2017, a 0.7 Bcf/d increase from the 2016 level. EIA forecasts that natural gas production in 2018 will be 6.1 Bcf/d higher than the 2017 level.
  • In November, the U.S. benchmark Henry Hub natural gas spot price averaged $3.01 per million British thermal units (MMBtu), up nearly 14 cents/MMBtu from October. Expected growth in natural gas exports and domestic natural gas consumption in 2018 contribute to an increase in EIA’s forecast Henry Hub natural gas spot price from an annual average of $3.01/MMBtu in 2017 to $3.12/MMBtu in 2018. NYMEX contract values for March 2018 delivery that traded during the five-day period ending December 7, 2017, suggest that a range of $1.98/MMBtu to $4.27/MMBtu encompasses the market expectation for March Henry Hub natural gas prices at the 95% confidence level.
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U.S. Liquid Fuels – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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

  • West Texas Intermediate (WTI) crude oil prices are forecast to average $4/b lower than Brent prices in 2018. After averaging $2/b lower than Brent prices through the first eight months of 2017, WTI prices averaged $6/b lower than Brent prices from September through November.
  • EIA estimates that U.S. crude oil production averaged 9.7 million barrels per day (b/d) in November, up 360,000 b/d from the October level. Most of the increase was in the Gulf of Mexico, where production was 290,000 b/d higher than in October. Higher production in November reflected oil production platforms returning to operation after being shut in response to Hurricane Nate. EIA forecasts total U.S. crude oil production to average 9.2 million b/d for all of 2017 and 10.0 million b/d in 2018, which would mark the highest annual average production, surpassing the previous record of 9.6 million b/d set in 1970.
  • U.S. regular gasoline retail prices averaged $2.56 per gallon (gal) in November, an increase of nearly 6 cents/gal from the average in October. The increase in November primarily reflected increasing crude oil prices. EIA forecasts the U.S. regular gasoline retail price will average $2.59/gal in December, 34 cents/gal higher than at the same time last year. EIA forecasts that U.S. regular gasoline retail prices will average $2.51/gal in 2018.

chart (3) chart (2) chart (1) chart chart (5) chart (4)

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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Global Liquid Fuels – SHORT-TERM ENERGY OUTLOOK

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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

  • North Sea Brent crude oil spot prices averaged $63 per barrel (b) in November, an increase of $5/b from the average in October. EIA forecasts Brent spot prices to average $57/b in 2018, up from an average of $54/b in 2017.
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Prices – SHORT-TERM ENERGY OUTLOOK

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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

  • North Sea Brent crude oil spot prices averaged $63 per barrel (b) in November, an increase of $5/b from the average in October. EIA forecasts Brent spot prices to average $57/b in 2018, up from an average of $54/b in 2017.
  • West Texas Intermediate (WTI) crude oil prices are forecast to average $4/b lower than Brent prices in 2018. After averaging $2/b lower than Brent prices through the first eight months of 2017, WTI prices averaged $6/b lower than Brent prices from September through November.
  • U.S. regular gasoline retail prices averaged $2.56 per gallon (gal) in November, an increase of nearly 6 cents/gal from the average in October. The increase in November primarily reflected increasing crude oil prices. EIA forecasts the U.S. regular gasoline retail price will average $2.59/gal in December, 34 cents/gal higher than at the same time last year. EIA forecasts that U.S. regular gasoline retail prices will average $2.51/gal in 2018.

chart (4) chart (3) chart (2) chart (1) chart chart (5)

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 a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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.

Forecast Highlights

Global liquid fuels

  • North Sea Brent crude oil spot prices averaged $63 per barrel (b) in November, an increase of $5/b from the average in October. EIA forecasts Brent spot prices to average $57/b in 2018, up from an average of $54/b in 2017.
  • West Texas Intermediate (WTI) crude oil prices are forecast to average $4/b lower than Brent prices in 2018. After averaging $2/b lower than Brent prices through the first eight months of 2017, WTI prices averaged $6/b lower than Brent prices from September through November.
  • NYMEX WTI contract values for March 2018 delivery traded during the five-day period ending December 7, 2017, suggest that a range of $48/b to $68/b encompasses the market expectation for March WTI prices at the 95% confidence level.
  • EIA estimates that U.S. crude oil production averaged 9.7 million barrels per day (b/d) in November, up 360,000 b/d from the October level. Most of the increase was in the Gulf of Mexico, where production was 290,000 b/d higher than in October. Higher production in November reflected oil production platforms returning to operation after being shut in response to Hurricane Nate. EIA forecasts total U.S. crude oil production to average 9.2 million b/d for all of 2017 and 10.0 million b/d in 2018, which would mark the highest annual average production, surpassing the previous record of 9.6 million b/d set in 1970.
  • U.S. regular gasoline retail prices averaged $2.56 per gallon (gal) in November, an increase of nearly 6 cents/gal from the average in October. The increase in November primarily reflected increasing crude oil prices. EIA forecasts the U.S. regular gasoline retail price will average $2.59/gal in December, 34 cents/gal higher than at the same time last year. EIA forecasts that U.S. regular gasoline retail prices will average $2.51/gal in 2018.

Natural gas

  • U.S. dry natural gas production is forecast to average 73.5 billion cubic feet per day (Bcf/d) in 2017, a 0.7 Bcf/d increase from the 2016 level. EIA forecasts that natural gas production in 2018 will be 6.1 Bcf/d higher than the 2017 level.
  • In November, the U.S. benchmark Henry Hub natural gas spot price averaged $3.01 per million British thermal units (MMBtu), up nearly 14 cents/MMBtu from October. Expected growth in natural gas exports and domestic natural gas consumption in 2018 contribute to an increase in EIA’s forecast Henry Hub natural gas spot price from an annual average of $3.01/MMBtu in 2017 to $3.12/MMBtu in 2018. NYMEX contract values for March 2018 delivery that traded during the five-day period ending December 7, 2017, suggest that a range of $1.98/MMBtu to $4.27/MMBtu encompasses the market expectation for March Henry Hub natural gas prices at the 95% confidence level.

Electricity, coal, renewables, and emissions

  • EIA expects the share of total U.S. utility-scale electricity generation from natural gas will average about 32% in 2017, down from 34% in 2016 as a result of higher natural gas fuel costs and increased generation from renewable energy sources. EIA projects the 2017 share of generation from coal will average 30%, about the same as last year. The forecast 2018 generation shares for natural gas and coal remain relatively unchanged from 2017, averaging 32% and 31%, respectively. Generation from renewable energy sources other than hydropower grows from about 8% in 2016 to a forecast share of nearly 10% in 2018. Nuclear power’s forecast share of total electricity generation averages about 20% in both 2017 and 2018, similar to its 2016 level.
  • Estimated U.S. coal production for the first 11 months of 2017 is 719 million short tons (MMst), 54 MMst (8%) higher than production for the same period in 2016. Annual production is expected to be 791 MMst in 2017, falling to 771 MMst in 2018 because of lower exports and no growth in coal consumption.
  • U.S. coal exports for the first three quarters of 2017 were 69 MMst, 68% (28 MMst) higher than exports for the same period in 2016. This total for the first three quarters of 2017 is already 14% (8 MMst) higher than total annual coal exports in 2016. EIA expects that exports will total 89 MMst in 2017 and 74 MMst in 2018.
  • U.S. wind electricity generating capacity at the end of 2016 totaled 81 gigawatts (GW). EIA expects wind capacity additions in the forecast to raise total wind capacity to 88 GW by the end of 2017 and to 96 GW by the end of 2018.
  • Total U.S. utility-scale solar electricity generating capacity at the end of 2016 was 22 GW. EIA expects solar capacity additions will bring total utility-scale solar capacity to 27 GW by the end of 2017 and to 30 GW by the end of 2018.
  • After declining by 1.7% in 2016, U.S. energy-related carbon dioxide (CO2) emissions are projected to decrease by 0.8% in 2017 and then to increase by 1.8% in 2018. Energy-related CO2 emissions are sensitive to changes in weather, economic growth, and energy prices.

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 – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  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 and storage: The front month futures price of natural gas for delivery at Henry Hub settled at $2.92 per million British thermal units (MMBtu) on October 5, a decrease of 15 cents/MMBtu from September 1 (Figure 8). Futures prices declined in early September, largely because of reduced demand related to Hurricane Irma in Florida. Most electricity generation in Florida is natural gas-fired, and electricity generation in Florida on September 11 was 41% lower than the average of the first seven days of September. Injections of working natural gas into underground storage exceeded market expectations and historical averages for the first three weeks in September, which further contributed to lower prices. The Henry Hub natural gas spot price averaged $2.98/MMBtu in September, 8 cents/MMBtu higher than in August.

Figure 8: U.S. natural gas prices and storage

As rising natural gas production keeps pace with increasing consumption and demand for exports—particularly for liquefied natural gas (LNG)—EIA projects a balanced market from the last quarter of 2017 through 2018 (Figure 9). LNG export capacity is expected to increase, with LNG exports projected to exceed 3 billion cubic feet per day (Bcf/d) in 2018, 66% higher than in 2017. In addition, increased takeaway capacity out of the Marcellus/Utica shale plays as a result of several new projects (such as the Rover and Nexus Gas Transmission pipelines) will help increase production. EIA forecasts a year-over-year increase in dry natural gas production of 4.9 Bcf/d in 2018 to a record of 78.5 Bcf/d.

Figure 9: Natural gas futures and ethane spot prices

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 a weekly series providing the Short-Term Energy Outlook as of October 11, 2017.  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) declined by 14 cents per gallon (gal) from September 1 to settle at $1.61/gal on October 5 (Figure 5). The RBOB-Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) declined by 24 cents/gal over the same period, settling at 25 cents/gal. EIA compares RBOB prices to Brent prices because EIA research indicates U.S. gasoline prices usually move with Brent prices, the international crude oil benchmark.

As the effects from Hurricane Harvey on gasoline production and transportation began to subside in September, gasoline prices and crack spreads declined. Only one refinery on the U.S. Gulf Coast remained offline as of October 4. No refineries were affected by Hurricane Irma, but because of increased evacuation-related demand, tanker truck limitations, and power outages, many retail gasoline stations were out of service. Following the hurricanes, the RBOB-Brent crack spread returned to seasonally lower levels, which typically occurs because winter-grade gasoline is cheaper for refineries to produce. Both U.S. consumption and exports of gasoline in the four weeks ending September 29 were close to their respective levels in September 2016, according to the Petroleum Supply Monthly (PSM).

Figure 5: Historical RBOB futures prices and crack spread

Ultra-low sulfur diesel prices: The ultra-low sulfur diesel (ULSD) futures price increased by 4 cents/gal from September 1 to settle at $1.79/gal on October 5. On September 25, ULSD prices rose to the highest point since mid-2015. The ULSD-Brent crack spread (the difference between the price of ULSD and the price of Brent crude oil) declined by 6 cents/gal over the same period and settled at 43 cents/gal (Figure 6).

Despite the decline in the ULSD crack spread, which reflected a return to more normal petroleum market operations following Hurricane Harvey, the average ULSD crack spread in September was 47 cents/gal, the highest for that month since 2008. According to the PSM, U.S. distillate exports set their third consecutive monthly record in July at 1.7 million b/d and U.S. distillate consumption in 2017 has generally remained close to or higher than 2016 levels. Increased consumption and exports of distillate indicates increased global economic growth, because distillate is primarily used to power large trucks and rail and is also used in industrial applications. Broad-based expansion in manufacturing PMIs in most countries, along with increased world trade momentum, is likely contributing to increased distillate demand.

Figure 6: Historical ULSD futures price and crack spread

ULSD prices typically rise during the winter months, when demand for home heating is highest. From 2005 to 2016, distillate futures prices during September for October delivery were on average 5 cents/gal lower than distillate prices during September for delivery the following January. However, in September 2017, ULSD prices for January delivery were trading lower than those for October delivery because of a backwardated ULSD futures curve (where near-term contract prices are higher than farther-dated ones) and the gradual reduction of seasonality in the U.S. distillate market. In September 2017, the January 2018 ULSD contract was 3 cents/gal lower on average than the October 2017 ULSD contract (Figure 7), the largest deficit since at least 2000.

Distillate stocks in the United States, ARA, and Singapore (whose data combine distillate and jet fuel) were all lower than their respective five-year averages during the last week of September. As noted in EIA’s 2017 Winter Fuels Outlook, temperatures this winter are expected to be colder than last winter, which was warmer than average. The U.S. East Coast, the region of the United States with the most households using heating oil for heating purposes, is expected to be colder than last winter; however, temperatures are forecasted to be near the five-year average. EIA projects U.S. distillate consumption to be 3% higher than last winter, but higher refinery runs this winter are expected to help moderate ULSD prices.

Figure 7: 1st-13th month futures spread

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 a weekly series providing the Short-Term Energy Outlook as of October 11, 2017.  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 Brent crude oil front-month futures price increased by $4.25 per barrel (b) from September 1 to settle at $57.00/b on October 5, 2017. West Texas Intermediate (WTI) crude oil prices increased by $3.50/b during the same period, settling at $50.79/b (Figure 1). September Brent and WTI monthly average spot prices were $4.45/b and $1.71/b higher, respectively, than the August average spot prices.

Figure 1: Crude oil front month futures prices

The oil industry on the U.S. Gulf Coast began to resume normal operations throughout September after refineries and ports were shut down in late August because of Hurricane Harvey. U.S. Gulf Coast refinery utilization reached 86% for the week ending September 29, 10 percentage points below the week ending August 25, but only 5 percentage points below five-year average utilization for this time of year. Hurricane Irma, which made landfall in Florida on September 10, did not significantly affect U.S. crude oil supply or refining operations, but because of increased evacuation-related demand, tanker truck limitations, and power outages, many retail gasoline stations were out of service.

Higher crude oil prices over the past month reflect declining global oil inventories, increasing expectations for global economic and oil demand growth, and geopolitical events. EIA estimates that global oil inventories fell by 0.5 million barrels per day (b/d) in the third quarter of 2017. This draw marked the third consecutive quarterly draw, the longest such stretch since 2013-14.

Falling production from the Organization of the Petroleum Exporting Countries (OPEC) has contributed to global oil inventory withdrawals in 2017. EIA estimates that OPEC crude oil production averaged 32.9 million b/d in the third quarter of 2017, down from an average of 33.4 million b/d in November 2016 (before the group’s voluntary production reductions). Libya, which is exempt from any production reductions, increased crude oil output in September, but a shutdown at one of its largest oil fields at the beginning of October presents uncertainty about the country’s longer-term production potential. Total OPEC crude oil production in the fourth quarter of 2017 is forecast to decline from the third quarter, averaging 32.7 million b/d.

Although unplanned OPEC supply outages remain low, crude oil prices may have increased based on a referendum in the Kurdistan Region of Iraq on September 25, where the majority of people voted for independence. Turkey sided with Iraq’s central government in opposing the vote. Turkey threatened to disrupt pipeline flows of approximately 0.5 million b/d of crude oil produced in the Kurdistan Region that is exported from the Turkish port of Ceyhan.

Economic conditions appear to be strengthening globally, which could contribute to oil demand growth in 2018. Manufacturing Purchasing Managers’ Indexes (PMI) in many countries continued to indicate expanding activity in September. The PMI is a leading indicator of economic activity, surveying purchasing managers in manufacturing businesses on expectations of output, new orders, employment, and other measures. An index level above 50 indicates expansion in manufacturing activity. Among these 27 countries’ manufacturing PMI surveys in September—10 of which are from outside the Organization for Economic Cooperation and Development (OECD)—25 countries had readings greater than 50, with the median at 53 (Figure 2). A total of 9 countries had survey readings greater than or equal to 55, and 2 had readings at 60 or higher.

Continued expansion of business activity in these countries could raise expectations for global gross domestic product (GDP) growth in the fourth quarter of 2017 and indicate higher consumption of crude oil and petroleum products. Expanding manufacturing and economic activity is a particularly important source of growth in distillate fuel consumption. EIA forecasts global liquid fuels consumption to grow by 1.6 million b/d in 2018 and to be more than 100 million b/d consistently by the middle of 2018.

Figure 2: Crude oil front-month - 3rd month futures price spread

Increases in front-month prices compared with longer-dated futures contracts typically reflect an increased need for oil inventories to meet demand. The Brent 1st–13th month futures price spread reached the highest level in more than three years in late September, closing at $1.63/b on October 5 (Figure 3). OECD total liquid fuel inventories declined from 2.997 billion barrels (8% higher than the five-year average) at the end of the second quarter of 2017 to 2.982 billion barrels (6% above the five-year average) at the end of the third quarter of 2017. Weekly crude oil inventories at the Amsterdam, Rotterdam, and Antwerp (ARA) hub in Europe fell 3.8 million barrels from the end of August to the end of September. In addition, total U.S. inventories of crude oil and petroleum products declined by 44.4 million barrels from the last week of June to the last week of September. During the past five years, inventories have typically increased by 10.9 million barrels over that period. Outside the OECD, trade press reports that crude oil inventories at Saldanha Bay, South Africa, were sold in recent weeks. The Saldanha Bay crude oil storage center can hold approximately 45 million barrels and is a key location for crude oil trade to East Asia and the Atlantic Basin.

Figure 3: Light crude oil prices minus Urals spot price

The shape of the Brent futures curve remains steeper than that of the WTI futures curve, as the WTI 1st–13th spread settled at -66 cents/b on October 5. The difference stems partly from the disruptive effects of Hurricane Harvey on the U.S. refining system, which contributed to a build in crude oil inventories in Cushing, Oklahoma, the physical delivery point for the WTI futures contract. However, part of the price difference between Brent and WTI partly reflects the expectations of increasing U.S. liquid fuels production in 2018.

The Brent-WTI spot price spread averaged $6.40/b in September. Although EIA expects the hurricane-related increase in the spread to subside, EIA forecasts the Brent-WTI spot price spread to average $3.50/b in 2018, which is higher than the first half of 2017 average of $1.69/b. The wider spread allows for increasing crude oil exports to more varied and distant locations amid rising U.S. production. Asia, in particular, has become a growing destination for U.S. crude oil exports.

Brent and WTI open interest: Trading activity in Brent and WTI futures contracts as measured by open interest, or the number of futures contracts opened but not settled, reached new highs in 2017. Brent average daily open interest reached an all-time high of 2.5 million contracts in May, whereas WTI reached an all-time high of 2.4 million contracts in September (Figure 4). All classifications of traders, as defined by the U.S. Commodity Futures Trading Commission, increased their open interest during the past several years.

WTI open interest overtook Brent in September. A contributing factor could be increased hedging among U.S. crude oil producers. Open interest in short positions (which locks in prices for a producer’s future production) among swap dealers (entities that hedge futures on behalf of oil companies) neared its all-time high for the week ending September 26 at 0.53 million contracts.

Figure 4: OECD composite leading indicators

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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