Vol. 27, No.40 Week of October 02, 2022
Providing coverage of Alaska and northern Canada's oil and gas industry

ANS on comeback

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Surprise US inventory draws bolster prices; OPEC+ mulls production cut

Steve Sutherlin

Petroleum News

Alaska North Slope crude staged a meaningful closing price gain Sept. 28, up $3.35 to $89.44 per barrel. West Texas Intermediate surged $3.65 to close at $82.15 and Brent scored $3.05 to close at $89.32.

Prices were boosted by a strong drawdown on U.S. inventories of gasoline and crude.

(See chart for this story in the online issue PDF.)

Total motor gasoline inventories for the week ending Sept. 23 fell by 2.4 million barrels from the week prior, indicating respectable demand, even as the summer driving season faded into memory.

The U.S. Energy Information Administration released the stat in a Sept. 28 report, adding that gasoline inventory stood 6% below the five-year average for the time of year.

U.S. commercial crude oil inventories - excluding the Strategic Petroleum Reserve - fell by 0.2 million barrels from the previous week to 430.6 million barrels, 2% below the five-year average for the time of year.

Over the same period, the SPR was drawn down by 4.6 million barrels as part of a Biden administration scheme to sell down the nation’s emergency oil supply to lower gasoline prices for consumers. The program was scheduled to end at the end of October, but the administration announced Sept. 19 that an additional 10 million barrels of crude would be sold in November.

The SPR stood at 422.6 million barrels as of Sept. 23. On Sept. 24, 2021, the SPR held 618.7 million barrels.

Sept. 28 gains came on the heels of rally begun the previous day.

After a brutal sell-down - which took ANS into the lower $80s for a day Sept. 26 - ANS gained $1.75 Sept. 27 to close at $86.09, WTI gained $1.79 to close at $78.50 and Brent jumped $2.21 to close at $86.27.

ANS lost $2.23 Sept. 26 to close at $84.34, WTI lost $2.03 to close at $76.71 and Brent lost $2.09 to close at $84.06.

Those losses came atop a jagged downdraft Sept. 23, that carried ANS $4.57 lower to close at $86.57, while WTI plunged $4.75 to close at $$78.74 and Brent slid $4.31 to close at $86.15.

Prices notched a small rally Sept. 22. ANS rose 59 cents to close at $91.14, WTI rose 55 cents to close at $83.49, and Brent rose 63 cents to close at $90.46.

But that rally was not enough to overcome losses Wednesday, Sept. 21. ANS fell 87 cents to close at $90.55, WTI fell $1.51 to close at $82.94 and Brent fell 79 cents to close at $89.83.

From Wednesday to Wednesday, ANS lost $1.11, closing at $89.44 Sept. 28 versus the $90.55 close Sept. 21.

The Sept. 28 ANS closing price was $11.92 below the Aug. 31 close of $101.36. ANS had managed to close above $100 on the bulk of days over the summer, but its price fell below that level Sept. 1 and did not break the $100 level again.

OPEC+ supply cut under discussion

Oil prices, which have been caught up in a risk-off sentiment that has cooled a broad array of financial assets, have experienced support from reports that the Organization of the Petroleum Exporting Countries and its associated producing countries are considering a major crude supply cut to bolster prices.

Leading OPEC+ members have initiated discussions about an oil output reduction, which could be instituted at the group’s next production meeting Oct. 5, Reuters said in a report released early Sept. 29 as Petroleum News went to press.

WTI and Brent edged higher in early trading.

An OPEC source said a cut was “likely,” and two other OPEC+ sources said key members had spoken on the matter, Reuters said.

Reuters, in an earlier report Sept. 27, said Russia was prone to propose a 1 million barrel per day cut at the October meeting, citing “a source familiar with the Russian viewpoint.”

OPEC+ will be paring back production by 100,000 bpd in October, clawing back a 100,000 bpd increase it put in place for the month of September.

The announcement was made at the 32nd OPEC and non-OPEC Ministerial Meeting Sept. 5.

“The OPEC and non-OPEC Ministerial Meeting noted the adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning,” OPEC said in a release following the meeting.

OPEC said higher volatility and increased uncertainties required continuous assessment of market conditions and readiness to make immediate adjustments to production, if needed.

“OPEC+ has the commitment, the flexibility, and the means within the existing mechanisms of the Declaration of Cooperation to deal with these challenges and provide guidance to the market,” it said.

Hurricane Ian shuts in production

The Bureau of Safety and Environmental Enforcement estimates that 9.12% of current oil production and 5.95% of natural gas production in the Gulf of Mexico was shut-in as a precaution as Hurricane Ian approached the area Sept. 27, it said in its final update on shut-in production statistics Sept. 28.

BSEE said post-hurricane inspections of Gulf facilities were underway.

Based on data from offshore operator reports, personnel have been evacuated from 11 production platforms, 2.11% of the 521 manned platforms in the Gulf of Mexico, BSEE said.

Personnel were evacuated from five non-dynamically positioned rigs, equivalent to 35.71% of 14 such currently operating rigs which include offshore drilling facilities including jack-up rigs, platform rigs, all submersibles and moored semisubmersibles, BSEE said.

Three dynamically positioned rigs moved off location out of the storm’s path as a precaution, representing 15.79% of the 19 DP rigs currently operating in the Gulf, BSEE said, adding that personnel remained on board and will return to the original location once the storm has passed.

“Once all standard checks have been completed, production from undamaged facilities will be brought back online immediately,” BSEE said. “Facilities sustaining damage may take longer to bring back online.”

Jet fuel demand to roar back

Global aviation fuel demand is expected to fully recover to pre-pandemic levels of 300 million tons per year in the next one to two years, Shell Aviation President Jan Toschka said Sept. 27.

Demand in the United States has returned to 2019 levels while European consumption has regained 80% of 2019 levels and is on track for full recovery in 2023, Toschka told Reuters at the 38th Asia Pacific Petroleum Conference.

“Asia has been a bit more of a bumpy road with markets opening up and closing down but mostly we expect Asia in particular, in the next year, to come back, but it might take another year before we see the full potential of the market,” he said.

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