US oil inventories continue to decline for the sixth week in a row
US oil inventories continue to decline for the sixth week in a row: Yesterday, Tuesday, June 29, 2021,
the American Petroleum Institute (API) announced that US crude oil inventories decreased by 8.153 million barrels for the week ending June 25.
Analysts had expected a decline of only 4.686 million barrels during the week.
In the previous week, the American Petroleum Institute announced that oil inventories decreased by 7.199 million barrels after analysts had expected a decline of 3.942 million barrels.
Crude oil inventories have fallen by more than 37 million barrels since the beginning of 2021, but are still up by 19 million barrels since January 2020.
The API also announced that gasoline inventories increased by 2.418 million barrels for the week ending June 25 (in addition to an increase of 959 thousand barrels in the previous week). Analysts had expected a decline of 886,000 during the week.
Distillates saw an increase in inventories this week of 428,000 barrels during the week,
in addition to last week’s increase of 992,000 barrels.
Cushing inventories fell this week by 1.318 million barrels.
Weekly oil prices
Oil prices rose on Tuesday after prices fell on Monday as OPEC prepares to meet to discuss the production.
Midday, before the data was released – West Texas Intermediate (WTI) crude was trading up $0.36 (+0.49%) to $73.27,
an increase of only $0.20 a barrel during the week.
The benchmark Brent Crude is also trading up on the day at $74.96 – so flat for the week.
At the end of the day, after the data release.
West Texas Intermediate is trading at $73.43 and Brent crude is trading at $75.14 a barrel.
Weekly oil production rates
With crude oil inventories continuing to decline for the sixth consecutive week, US oil production also fell to an average of 11.1 million barrels per day for the week ending Friday, June 18, according to the latest data from the Energy Information Administration.
This represents a daily decrease of 100,000 barrels from the previous week
Oil demand recovers in India
Newspaper reports indicate that Indian demand for fuel has begun to improve as states begin to ease shutdowns and start raising operating rates for refineries.
The Argus report included Indian Oil Minister Dharmendra Pradhan saying that economic activity has also improved during the past three weeks,
which helped increase demand for fuel.
Some officials in the oil sector see the possibility of a recovery in fuel demand to pre-pandemic levels, by the end of 2021.
Citing informed sources, Argos published an increase in the operating rates of refineries in state-owned companies by between 3% and 10%,
adding that the increase was due to the increase in prices at the pump.
Through the movement of refineries, it is expected that demand rates will continue to rise in the coming weeks despite the continued activation of restrictions on movement and concern about a new type of virus called Delta Plus.
sharp increase in COVID-19 cases
Last month, India suffered a rapid and sharp increase in COVID-19 cases, which led to a widespread shutdown that affected fuel demand.
And Argus published in a previous report that consumption of gasoline only decreased by 19% during the period from April to May,
as the demand for diesel decreased by 1/5 in this period.
OPEC warned at that time that demand in India was the main impediment to lower expected global demand growth than it was in the quarter.
India is a major importer and consumer of crude oil, and one of the most vulnerable to price hikes.
OPEC has been calling a lot for more barrels to be brought back into global supply since demand started picking up, causing prices to rise.
Pradhan called on OPEC to phase out last year’s self-imposed production cuts in a virtual meeting on Monday with OPEC Secretary-General,
Mohammad Barkindo, as they discussed recent developments in the oil market, trends in oil demand recovery,
economic growth prospects, and overcoming energy challenges.
Russia’s Efforts to Increase Oil Production
Reuters reported that Russia is facing difficulty in increasing oil production after its commitment to reduce oil production under its agreement with OPEC.
Russia produces about 10.42 million barrels per day of crude oil and distillates since the beginning of this month,
which is lower than the average production in May of 10.45 million barrels per day.
Some specialists told Reuters that the reason for the decline may be related to the difficulty of increasing production in the old fields.
There was talk of such difficulties at the beginning of last year when OPEC first agreed to take about 7.7 million barrels per day out of the market in response to the demand destruction caused by the pandemic.
Bloomberg
Speaking to Bloomberg in May 2020, the CEO of the oil industry, Evgeny Kolesnik,
said that the mass shutdown of oil wells is something much more dangerous than a gradual reduction.
He also said that under Russian climatic conditions, after a prolonged well shutdown is never
expected to pump production at the same levels as before.
In the beginning, the report indicated that when Russia joined OPEC members in their efforts to control production,
its oil companies reduced a relatively small part of production slowly and for only a few months. In 2020,
these companies are being asked to run much deeper, much faster, and much longer.
With this long production suspension, it is possible that some wells will not be able to restart.
The longer a well is shut off, the greater the potential for pressure changes,
as well as water content changes capable of rendering the well unusable again.
OPEC meets later this week to discuss these steps in the production control agreement.
Early reports said the organization was considering bringing additional supplies online
from August in response to the rapid recovery in demand.