Oil prices are lower as those fabled Saudi oil tankers that were in ports continue to offload those supplies. The American Petroleum Institute reports showed that U.S. oil inventories spiked by 8.42 million barrels of crude. The stunning increase came with another 2.29 million barrel drop in the Cushing, Oklahoma delivery point. Still, the size of the overall crude build weighed even more, given the 4.27-million barrel increase in distillate and raised concerns about the massive glut of diesel. On the positive side, gasoline inventories fell by 2.91 million barrels, indicating that demand there is still improving.
In fact, despite this inventory setback, the oil and product market has had an incredible comeback. From the shock of sub-zero oil prices to $40.00 plus a barrel, is among the most surprising moves in oil in a market where movements in the price have already become legendary. The comeback in oil even seemed to stun the Energy Information Administration, who admitted as much in their most recent “Short Term Energy Outlook”.
The EIA’s June outlook revises the forecast for Brent crude prices up to $38.00 per barrel in 2020. The change is largely due to higher-than-expected crude oil prices in May, driven by a combination of additional OPEC+ production cuts, declining U.S. production, and rising demand related to reductions in COVID-19 stay-at-home orders. EIA expects prices to average $48 per barrel in 2021.
“Initial data show the global oil market rebalancing faster than EIA previously forecast. EIA estimates that global oil inventories increased at a rate of 9.4 million barrels per day in the first five months of 2020, leaving inventories 1.4 billion barrels higher at the end of May than January. However, we expect inventories to begin drawing in June, as a result of sharper declines in global oil production during June and greater global oil demand than previously expected.”
On consumption, the agency continued:
“EIA estimates U.S. oil consumption will be 23% lower in the second quarter of 2020 compared with the same quarter last year. However, EIA believes the largest declines have already occurred, and that demand will generally rise through the end of next year, averaging 19.5 barrels per day in 2021.”
EIA said it continues to forecast a decline in U.S. dry natural gas production from 2019 record levels, as low natural gas demand continues to put downward pressure on prices. Dry natural gas production is forecast to fall from 92.4 billion cubic feet in April to 84.7 billion cubic feet in December 2020. EIA estimates U.S. natural gas inventories started June 18% above the comparable five-year average.