Record low demand and low crack spreads drive refinery run declines (4/29/2020)

Transportation fuel demand in the United States has decreased since mid-March 2020, as a result of reduced economic activity and stay-at-home orders aimed at slowing the spread of the 2019 novel coronavirus disease (COVID-19). With low demand and a decrease in profitability, as measured by crack spreads, U.S. refineries have reduced gross inputs (runs), which dropped to 12.8 million barrels per day (b/d) for the week ending April 17, 3.8 million b/d lower than the previous five-year (2015–19) average and the lowest level since 2008 (Figure 1). Gross inputs increased slightly to 13.2 million b/d the week of April 24. ... More »

WTI crude oil futures prices fell below zero because of low liquidity and limited available storage (4/22/2020)

On Monday, April 20, 2020, New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) crude oil front-month futures prices fell below zero dollars per barrel (b)—at one point, trading at -$40.32/b and remained below zero for part of the following trading day. Monday marked the first time the price for the WTI futures contract fell below zero since trading began in 1983. Negative prices in commodity markets are very rare, but when they occur they typically indicate high transactions costs and significant infrastructure constraints. In this case, the WTI front-month futures contract was for May 2020 delivery, and the contract was set to expire on April 21, 2020. Market participants that hold WTI futures contracts to expiration must take physical delivery of WTI crude oil in Cushing, Oklahoma. Typically, most market participants close any futures contracts ahead of expiration through cash settlement in order to avoid taking physical delivery, and only about 1% of contracts are physically settled. The extreme market events of April 20 and April 21 were driven by several factors, including the inability of contract holders to find other market participants to sell the futures contracts. In addition, in this case, the scarcity of available crude oil storage meant several market participants could not take physical delivery at expiration and resorted to selling their futures contracts at negative prices, in effect paying a counterparty to take hold of the contracts. ... More »

EIA forecasts U.S. crude oil production to decline because of low oil prices (4/15/2020)

In the April 2020 update of its Short-Term Energy Outlook (STEO), released on April 7, and before a recently announced agreement by oil producing countries to limit production, the U.S. Energy Information Administration (EIA) forecasts that U.S. crude oil production will average 11.8 million barrels per day (b/d) in 2020, a 4% decline from the 2019 production levels. Crude oil production will average 11.0 million b/d in 2021, a 6% decline from 2020 (Figure 1). If realized, the STEO 2020 production decline would mark the first annual decrease since 2016. The majority of the forecasted production decline occurs between the first and fourth quarters of 2020, dropping from 12.7 million b/d to 11 million b/d (13%) and remaining around that level through 2021. The forecast did not incorporate the April 12 joint announcement by the Organization of the Petroleum Exporting Countries (OPEC) and several other non-OPEC countries to reduce crude oil production. These production reductions may significantly affect global balances and could provide upward price pressure that would affect U.S. crude oil drilling and production. ... More »

EIA forecasts record high global inventory builds (4/8/2020)

The 2019 novel coronavirus disease (COVID-19) pandemic has caused significant changes in energy fuel supply and demand patterns globally. Crude oil prices have fallen significantly since the beginning of 2020, largely driven by the economic contraction caused by COVID-19 and a rapid increase in crude oil supply following the suspension of previously agreed upon production cuts among the Organization of the Petroleum Exporting Countries (OPEC) and partner countries. As a result of low demand caused by COVID-19 and high levels of global crude oil production, the U.S. Energy Information Administration (EIA), in its April Short-Term Energy Outlook (STEO), forecasts large inventory builds in 2020 followed by inventory draws in 2021. If realized, EIA's forecast global inventory builds of 3.9 million barrels per day (b/d) in 2020 will more than double the previous record of 1.8 million b/d set in 1998. ... More »

U.S. gross refinery inputs declined in 2019, and weekly gross inputs have fallen significantly so far in 2020 (4/1/2020)

U.S. gross refinery inputs averaged 17.0 million barrels per day (b/d) in 2019, down from the record high of 17.3 million b/d set in 2018, but still the second-most on record (based on data going back to 1985). The drop in 2019 is the first time since 2009 that annual gross refinery inputs decreased from the previous year. The lower annual refinery runs in 2019 were the result of a sharp decrease in refinery runs during the February–March maintenance season and because of the Philadelphia Energy Solutions (PES) fire and refinery outage in June (Figure 1). More recently, weekly refinery gross inputs fell significantly the week ending March 27, 2020, as a result of the effects on petroleum product demand from the 2019 novel coronavirus disease (COVID-19). Gasoline crack spreads (the difference between wholesale prices and crude oil) have fallen sharply recently, reflecting weak demand. As the COVID-19 outbreak continues, gross refinery inputs and petroleum product demand remain highly uncertain ... More »