Oil in sanguine $70s
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Motor fuel driven supply constrictions overcome Delta variant demand fears
Alaska North Slope crude rose 47 cents July 28 to close at $74.40 per barrel, Brent gained 26 cents to close at $74.74 and West Texas Intermediate jumped 74 cents to close at $72.39.
The trading sustained a pattern that found the major benchmarks hovering relatively sanguinely in the mid-$70 range for the week, after rallying during the last four days of the previous week’s trading in the wake of a mini-crash of prices July 19 - sparked by rising cases of the highly transmittable Delta variant of the COVID-19 virus.
WTI fell 16 cents Monday July 26, to close at $71.91, as global cases of COVID-19 infections surged in the United States, Brazil, India, Indonesia and the U.K. to a two-month high, according to a July 25 Bloomberg report. In Asia, countries saw more fatalities and renewed restrictions, and the U.S. raised a COVID19 travel warning for Spain to the highest level.
ANS and Brent eked out a small gain July 26, but on July 27, ANS fell 25 cents to close at $73.93, Brent fell 2 cents to close at $74.48, and WTI fell 26 cents to close at $71.65.
Although traders remained wary about demand, supply forces pushed prices upward to a two-week high as U.S. crude, gasoline and distillate storage levels fell in a rebounding summer driving season.
The U.S. Energy Information Administration said July 28 that U.S. crude inventories fell by 4.1 million barrels for the week ended July 23, the ninth weekly decline in 10 weeks. Gasoline inventories also moved lower, by 2.25 million barrels.
Brent rose above $75, and WTI made gains toward $73 in early trading July 29 as Petroleum News went to press.
“There appears to be quite a bit of hesitancy to push the market in either direction, leaving it in a holding pattern,” said Warren Patterson, the head of commodities strategy for ING in Singapore. “There is still uncertainty over the demand picture, with COVID-19 cases continuing to tick higher.”
Crude inventories in Cushing, Oklahoma - delivery hub for WTI - fell to the lowest level since January 2020, down 1.27 million barrels, Patterson said.
Federal leasing review drags onA federal lands leasing review ordered in January by President Joe Biden will have only muted impact on the U.S. production outlook, based on S&P Global Platts Analytics projections.
Onshore shale output is expected to reach to 8.5 million barrels per day by the end of 2022, up from 7.3 million bpd in July 2021, pushing overall U.S. production to 12.4 million bpd by end-2022, up from 10.9 million bpd in July 2021.
Interior Secretary Deb Haaland drug her feet in a July 27 Senate hearing, on committing to restarting oil and gas lease sales on federal lands and waters by the end of September.
Lawsuits over Interior’s leasing review brought by 14 petroleum producing states prompted an order in June from a U.S. district court judge in Louisiana to end to the moratorium.
The judge granted a preliminary injunction in the case and ordered Interior to re-calendar Lease Sale 258 in Alaska’s Cook Inlet, and Lease Sale 257 in western and central Gulf of Mexico.
“There’s a lot of work that goes into moving that forward,” Haaland said. “The review is being finalized internally and we hope to get it out very soon.”
Alaska Sen. Lisa Murkowski chided Haaland’s non-commitment after previously promising a report by early summer.
“Last month you testified before the House Natural Resources Committee that it will be coming soon; last week you were quoted again that it will be soon,” Murkowski told Haaland, adding that Haaland had testified earlier in the morning that the report would be coming soon.
“I’m not going to ask you when it’s going to be coming because I think I know what your answer is; none of us know what your answer is,” Murkowski said. “I hope you can sense the frustration that so many of us have in anticipating this and wondering when we will be able to expect that you’ll be in compliance with the judge’s order.”
Murkowski requested that Haaland provide in writing a list of all stakeholders and entities Haaland has met with in Alaska including state officials, Alaska Native corporations, tribes, and private companies.