NEW YORK, Oct. 27 (Reuters) – Crude oil tanks at the Cushing, Oklahoma, storage and delivery center for U.S. crude futures are more depleted than they have been in the past few years. past three years, and the prices of older oil contracts suggest they will stay lower for months.
U.S. demand for crude among gasoline and diesel refiners has increased as the economy recovered from the worst of the pandemic. Demand across the world means other countries have turned to the United States for barrels of crude, also increasing Cushing’s mintage.
Analysts expect inventories to continue falling in the near term, which could push U.S. crude prices further
“Storage at Cushing alone has the potential to really rally the market to the moon,” said Bob Yawger, director of energy futures at Mizuho.
Cushing’s inventories fell to 27.3 million barrels, the lowest since October 2018, the Energy Information Administration said on Wednesday, about half of inventories at the same time a year ago. [EIA/S]
Inventories fell due to accelerating U.S. demand, which encouraged domestic refiners to keep crude at home to provide fuels such as gasoline and distillates to U.S. consumers, Reid I’Anson said, Senior commodity analyst at Kpler.
In addition, US production has been slow to recover from the declines seen in 2020. At the end of 2019, the country was producing around 13 million barrels of oil per day (bpd), but in recent weeks it has been lower. at 11.5 million bpd. At the same time, the product supplied by refineries – an indicator of demand – is about 1% lower than pre-pandemic peaks.
As a result, the gap between US crude and Brent collapsed. The spread narrowed to around $ 1.09 a barrel this week, from $ 4.47 earlier this month, which was about the widest spread since May 2020.
A further sign of strong near-term demand for U.S. crude, the premium for U.S. crude delivered in December versus December 2022 peaked this week at $ 12.48 per barrel, the most since at least 2014, according to the data from Refinitiv Eikon.
Over the next three months, Rystad Energy expects refineries in the United States to grow by 500,000 to 600,000 barrels per day. This would exceed production gains of 300,000 to 400,000 bpd and keep the spread between the two benchmarks narrow.
“Only if OPEC (the Organization of the Petroleum Exporting Countries) steps in with more crude supply or if COVID shows its ugly head again, dampening demand, this high volatility will occur,” he said. said Mukesh Sahdev, senior vice president and head of downstream. at Rystad Énergie.
Reporting by Stéphanie Kelly; Editing by David Gregorio and Marguerita Choy
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