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Demand supports ANS
US oil inventories fall as Ukraine strikes major Russian oil facilities
Steve Sutherlin Petroleum News
Oil futures leapt some 3% March 13 as the U.S. Energy Information Administration reported a drawdown of U.S. crude reserves and gasoline reserves.
West Texas Intermediate crude lofted $2.16, or 2.8% March 13 to close at $79.72 per barrel and Brent leapt $2.11 or 2.6% to close at $84.03.
(See chart in the online issue PDF)
The daily Alaska North Slope crude closing price estimate from the Alaska Department of Revenue for March 13 was not released by press time for Petroleum News. ANS and Brent have been closely correlated of late, in fact Brent on March 12 held a slim 19-cent premium over ANS. Assuming a corresponding 2.6% increase for ANS March 13, ANS likely jumped some $2.12 to close in the vicinity of $83.85.
The Alaska Department of Revenue in its Spring Revenue Forecast released March 13 said the ANS price for FY 2024 is projected at $84.08, and $78.00 for FY 2025.
Although an ANS crude price was then yet unknown, March 13, 1968, will live in history; it was the day the Atlantic Richfield Co. and Humble Oil and Refining Co. made headlines with the discovery of oil at Prudhoe Bay on the North Slope.
March 12, 2024, marks the 56th anniversary of the discovery. The first measured oil flow -- 1,152 barrels per day -- from the Prudhoe Bay State #1 well came March 12, 1968.
Prudhoe Bay came on stream June 20, 1977.
U.S. commercial crude oil inventories for the week ended March 8 -- excluding Strategic Petroleum Reserve supplies -- fell by 1.5 million barrels from the week prior, to 447.0 million barrels -- 3% below the five-year average for the time of year, the EIA reported March 13.
Total motor gasoline inventories decreased by 5.7 million barrels for the period to 234.1 million barrels -- 3% below the five-year average for the time of year, the EIA said.
Ukraine's reported successful attacks on Russian energy infrastructure and continued uncertainty around the Israel-Hamas war also contributed to the jump in prices, which were already moving higher prior to the EAI report, analysts said.
Ukrainian drones struck a Rosneft refinery in the Ryazan region some 130 miles from Moscow on March 13, followed by strikes on the Novoshakhtinsk refinery in the Rostov region.
On March12, Ukraine hit a Lukoil refinery in Nizhny Novgorod, 265 miles from Moscow.
The damage may cause Russia to import fuel for domestic use.
A full repair of the facilities normally would take a couple of months, but sanctions have tightened Moscow's access to Western parts, the Wall Street Journal reported.
Russia has sourced some Western parts from third countries, but the process is complicated and slow, especially for specialized parts, WSJ said, adding that Russian and Chinese equivalents are sometimes incompatible.
Russia has already cut exports of fuel, and while the United States doesn't allow imports of Russian petroleum products, the Russian deficits could indirectly cause higher U.S. fuel prices. ANS edged 2 cents lower March 12 to close at $81.73, as WTI fell 37 cents to close at $77.56 and Brent fell 29 cents to close at $81.92.
Oil traders were wary of hot U.S. inflation data and the specter of delays in Federal Reserve rate cuts that had been expected in June.
On March 11 ANS gained 17 cents to close at $81.75, WTI fell 8 cents to close at $77.93 and Brent added 13 cents to close at $82.21.
ANS dropped 89 cents March 8 to close at $81.58, while WTI dropped 92 cents to close at $78.01 and Brent dropped 88 cents to close at $82.08.
ANS added 13 cents March 7 to close at $82.47, as WTI turned in a 20-cent loss to close at $78.93 and Brent was unchanged at $82.96.
OPEC maintains upbeat demand forecast The Organization of the Petroleum Exporting Counties raised its world economic growth forecast for 2024 to 2.8%, while its economic growth forecast was unchanged at 2.9% for 2025. Its U.S. economic growth forecast for 2024 was revised up to 1.9%, as the "healthy momentum from 2H23 is expected to continue," it said in the March Monthly Oil Market Report issued March 12.
OPEC maintained its forecast that world oil demand will increase by 2.25 million barrels per day in 2024 and by 1.85 million bpd in 2025.
Non-OPEC liquids production in 2024 is expected to grow by 1.1 million bpd, slightly revised down from the previous month's assessment.
"In 2024, the main drivers for liquids supply growth are expected to be the U.S., Canada, Brazil and Norway, while the largest declines are anticipated in Russia and Mexico," OPEC said.
The United States produced more crude oil than any nation at any time, for the past six years in a row, the EIA said in a March 11 report.
U.S. crude production averaged 12.9 million bpd in 2023, breaking the U.S. and global record of 12.3 million bpd, set in 2019, the EIA said. Average monthly U.S. oil production established a record in December 2023 at more than 13.3 million bpd.
The production record is unlikely to be broken in the near term because no other country has reached production capacity of 13.0 million bpd, EIA said. Saudi Aramco scrapped plans to increase production capacity to 13.0 million bpd by 2027.
Together, the United States, Russia, and Saudi Arabia accounted for 40% (32.8 million bpd) of global oil production in 2023. The three countries have produced more oil than any others since 1971.
The next three largest producing countries -- Canada, Iraq, and China -- combined produced 13.1 million bpd in 2023.
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