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

Vol. 28, No.39 Week of September 24, 2023

ANS into upper $90s

Hawkish Fed interest rate talk cools crude rally but ANS closes at $95.53

Steve Sutherlin

Petroleum News

Alaska North Slope crude maintained its position in the upper $90s Sept. 20, even in the face of hawkish comments from the U.S. Federal Reserve that sent financial markets and key commodities into a downdraft.

ANS dropped $1.10 on the day to close at $95.53, while West Texas intermediate slid 92 cents to close at $90.28 and Brent slid 81 cents to close at $93.53.

The Fed declined to raise rates at its Sept. 20 meeting, but in a follow up press conference Chairman Jerome Powell indicated that a November interest rate hike was likely, and that rates would need to stay higher for longer into 2024 in order to meet the Fed's inflation target of 2%.

"We are prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we are confident that inflation is moving down sustainably toward our objective," Powell said.

The upward trajectory of oil prices has complicated the Fed's decision making, although oil and food prices are not included in the Fed's core inflation rate.

The oil price slide on Sept. 20 defied a drawdown in U.S. inventories.

U.S. commercial crude oil inventories for the week ending Sept. 15 -- excluding the Strategic Petroleum Reserve -- fell 2.1 million barrels from the previous week to 418.5 million barrels, 3% below the five-year average for the time of year, the U.S. Energy Information Administration said in its Sept. 20 data summary.

Total motor gasoline inventories edged down by 0.8 million barrels for the period and are about 3% below the five-year average for the time of year, the EIA said.

ANS fell 65 cents Sept. 19 to close at $96.64, as WTI edged 28 cents lower to close at $91.20 and Brent edged down 9 cents to close at $94.34.

ANS hit its apex for the week on Sept. 18, up 76 cents to close at $97.29. WTI gained 71 cents on the day to close at $91.48 and Brent added 50 cents to close at $94.43.

Prices were boosted Sept. 18 as the EIA released its monthly drilling productivity report which said output from top U.S. shale-producing regions will fall in October for a third consecutive month, to the lowest level since May 2023.

EIA data showed U.S. crude production is on track to drop to 9.393 million barrels per day in October from 9.433 million bpd in September -- down from a record 9.476 million bpd in July.

ANS was up 11 cents Sept. 15 to close at $96.53, as WTI notched a 61-cent gain to close at $90.77 and Brent added 23 cents to close at $93.93.

ANS leapt $1.73 Sept. 14 to close at $96.42, while WTI popped $1.64 to close at $90.16 and Brent surged $1.82 to close at $93.70.

ANS turned in a gain over the trading week ending Sept. 20, up 83 cents from its Sept. 13 close of $94.70 to $95.53. On Sept. 20 ANS traded at a $3.65 premium over Brent.

China to lead air travel demand

China has of recent been a drag on oil prices as traders fret over the county's slow recovery from COVID-19 lockdowns, but the future is bright for jet fuel demand.

U.S. airliner manufacturer Boeing sees China leading the world's air travel recovery.

China's domestic aviation market will be the largest in the world by the end of 2042, according to Boeing's 2023-2042 Commercial Market Outlook released Sept. 20.

Boeing forecast that China will require 8,560 new commercial aircraft through 2042, lofted by economic growth well above the global average and a boom in demand for domestic air travel.

China's commercial airliner fleet will take off, doubling to 9,600 jets over the next 20 years, Boeing said, adding that it expects China will account for one-fifth of the world's airplane deliveries in the next two decades.

China domestic demand will require 6,470 new single-aisle airplanes such as the Boeing 737 MAX family, Boeing said.

"Domestic air traffic in China has already surpassed pre-pandemic levels and international traffic is recovering steadily," said Darren Hulst, Boeing vice president of commercial marketing. "As China's economy and traffic continue to grow, Boeing's complete line-up of commercial jets will play a key role in helping meet that growth sustainably and economically."

In addition to single-aisle jets, Chinese carriers will require 1,550 widebody airplanes to support a growing network of international routes, Boeing said, adding that fleet growth will drive two thirds of its forecast deliveries in China, while older jets are replaced by higher efficiency modern aircraft featuring reduced CO2 emissions.

In addition to passenger aircraft fleet growth, Boeing expects to deliver 190 new jet freighters to meet growth in e-commerce and express shipping.

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