Providing coverage of Alaska and northern Canada's oil and gas industry
April 2023

Vol. 28, No.14 Week of April 02, 2023

Relief rally holds

Kurdish supply cut ups prices 5% March 27; Crude draw mutes profit-taking

Steve Sutherlin

Petroleum News

Oil futures fell March 29 as investors locked in gains following a two-day rally.

Alaska North Slope crude declined 69 cents on March 29 to close at $76.15, while West Texas Intermediate fell 23 cents to close at $72.97 and Brent fell 37 cents to close at $78.28.

A dollar recovery also crimped crude prices, as fading fears of a bank crisis prompted bets that the Federal Reserve would have headroom to continue raising interest rates.

Prices advanced in early trading March 29 as the U.S. Energy Information Administration reported a large draw from commercial crude inventories, but prices faded into the close.

Oil inventories for the week ending March 24 - excluding Strategic Petroleum Reserve crude - plunged by 7.5 million barrels from the previous week to 473.7 million barrels, 6% above the five-year average for the time of year, the EIA said. Crude levels in the SPR were unchanged for the week.

Commercial inventories were expected to rise by 200,000 barrels last week, a Reuters poll showed March 27.

Finished gasoline inventories increased, the EIA said.

ANS rose 64 cents March 28 to close at $76.85, as WTI added 39 cents to settle at $73.20 and Brent rose 53 cents to close at $78.65.

Supply concerns sparked the largest movement of the week.

Prices spiked more than $3 higher March 27 after Iraq halted exports of 450,000 barrels per day - 0.5% of daily global supply - from its northern Kurdistan region through Turkey, following an arbitration that found Baghdad’s consent was needed to ship the oil.

“The loss of this northern Iraq oil is a problem for the market, and I think it’s being underestimated,” John Kilduff, partner at Again Capital in New York told Reuters March 29.

Barclays said a protracted outage of Kurdish exports into yearend 2023 would add $3 to the bank’s $92 Brent price forecast for 2023.

ANS leapt into the upper $70s March 27 - up $3.34 to close at $76.21, as WTI vaulted $3.55 to close at $72.81 and Brent popped $3.13 for a close of $78.12.

The market also learned Russia cut production by 300,000 bpd for the first three weeks of March, less than a 500,000-bpd target set by the Kremlin, but still tightening global supply.

China’s crude oil imports are expected to jump 6.2% in 2023 to 540 million tonnes, an annual forecast by a research unit of China National Petroleum Corp. said March 27.

ANS fell 55 cents March 24 to close at $72.87, while WTI dropped 70 cents to close at $69.26 and Brent dropped 92 cents to close at $74.99.

On March 23, ANS lost 70 cents to close at $73.42, WTI slid 94 cents to close at $69.96 and Brent slid 78 cents to close at $75.91.

From Wednesday to Wednesday, ANS rose $2.02 from its March 22 close of $74.13 to $76.15 March 29.

Time to refill SPR?

Lower WTI prices may spur the U.S. Department of Energy to solicit bids for SPR replenishment, said Hillary Stevenson, IIR Energy senior director of energy market intelligence.

The administration said it would repurchase crude at $67-72 per barrel.

The DOE sought bids for up to 3 million barrels for February delivery to the SPR, but no bids were awarded, Stevenson told Rigzone, adding that SPR officials said bids for February injections were about $10 per barrel too high and some of them were for sweet crude when the request was for sour.

The SPR stands at 372 million barrels - the lowest level since 1983, prompting concerns of compromise in national energy security.

Dallas Fed sees slow growth

Growth in the oil and gas sector stalled in first quarter 2023, according to oil and gas executives responding to the Dallas Fed Energy Survey, released March 29.

The business activity index was 2.1 in Q1, down sharply from 30.3 in Q4 2022, the survey said, adding that a near-zero reading indicates activity was largely unchanged from the prior quarter, after more than two years of rising activity.

Oil and natural gas production increased at a slower pace than the prior quarter, executives at exploration and production firms said. The oil production index remained positive but declined to 10.5 in the first quarter from 25.8 in the fourth. Firms reported rising costs for the ninth consecutive quarter.

The company outlook index turned negative in the first quarter, falling 27 points to -14.1, the survey said. The overall outlook uncertainty index increased 23 points to 62.6, and 68% of firms reported greater uncertainty.

On average, respondents expect a WTI price of $80 per barrel by year-end 2023; responses ranged from $50 to $160 per barrel, the survey said.

For the entire sample, firms need $62 per barrel on average to profitably drill, higher than the $56 price when the question was asked last year, the survey said. Across regions, average breakeven prices to profitably drill range from $56 to $66 per barrel.

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