Exploration and development expenditures likely to drop from 2019’s four-year high (5/28/2020)

Global expenditures related to oil and gas exploration and development (E and D) increased $42 billion (13%) in 2019, totaling $361 billion, according to the aggregate financial reports for 102 oil companies. Additions to these companies’ collective proved reserves totaled 18 billion barrels of oil equivalent (BOE), consistent with the 2010–18 annual average additions. As a result of the significant price declines since the beginning of 2020, however, global proved reserves will likely be revised significantly downward this year. E and D expenditures will also likely decline significantly, with several companies already announcing large budget reductions. ... More »

North American crude oil prices are closely, but not perfectly, connected (5/20/2020)

The decline on April 20, 2020 in the price of the front-month New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) futures contract was the largest and swiftest on record. Front-month WTI prices dropped as low as -$40.32 per barrel (b) on April 20 during intraday trading before closing at -$37.63/b. Prices have since recovered, with NYMEX front-month WTI prices closing at $31.82/b on May 18. The April 20 NYMEX WTI market event proved short-lived, but the incident is still useful for highlighting the interconnectedness of the wider North American crude oil market. In addition to the NYMEX WTI futures contract, several important North American crude oil spot price markers also fell below zero on April 20, including WTI Midland, Mars, West Texas Sour (WTS), and Bakken Clearbrook. Although these markers correspond to different types of crude oils and trade at different places around the continent, the integration of North American crude oil transportation infrastructure and the use of NYMEX WTI in formulas used to calculate some other prices all but ensured that the highly local shock to NYMEX WTI on April 20 was quickly felt throughout the North American market. ... More »

EIA raises crude oil price outlook slightly as announced supply cuts lead to high inventory draws in 2021 (5/13/2020)

In its May Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) expects Brent crude oil prices will average $34 per barrel (b) in 2020 and $48/b in 2021. Although market outlooks are subject to many risks, the May STEO remains subject to heightened levels of uncertainty because the effects on energy markets of mitigation efforts related to the 2019 novel coronavirus disease (COVID-19) are still evolving. Despite the April agreement between the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) to reduce production levels through the end of 2022, crude oil prices have remained at some of their lowest levels in more than 20 years. EIA expects that global liquid fuels inventories will grow by an average of 2.6 million barrels per day (b/d) in 2020 after falling by about 0.2 million b/d in 2019. EIA expects global inventory builds will be largest in the first half of 2020, rising at a rate of 6.6 million b/d in the first quarter and increasing to builds of 11.5 million b/d in the second quarter because of widespread travel limitations and sharp reductions in economic activity. After the first half of 2020, EIA expects global consumption to increase, leading to inventory draws for at least six consecutive quarters and putting upward pressure on crude oil prices (Figure 1). ... More »

Low crude oil prices, record-high inventories, and low demand drive gasoline prices down (5/6/2020)

On April 27, 2020, the U.S. average regular retail gasoline price was $1.77 per gallon (gal), the lowest price since February 2016. On May 4, the U.S. average gasoline price increased slightly to $1.79/gal. The United States declared a national emergency on March 13 in response to concerns regarding spread of the 2019 novel coronavirus disease (COVID-19). From March 16 to May 4, the U.S. average regular retail gasoline price fell by $0.46/gal. The lower gasoline prices reflect low crude oil prices, low gasoline demand, and rising gasoline inventories. ... More »