08202018Mon
Last updateFri, 17 Aug 2018 5pm

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U.S. Cuts Oil Output Outlook

The U.S. Energy Information Administration (EIA) forecasts total global liquid fuels inventories to decrease by 0.2 million b/d in 2018 compared with 2017, followed by an increase of 0.3 million b/d in 2019. This outlook of relatively stable inventory levels over the forecast period contributes to a forecast of monthly average Brent crude oil prices remaining relatively stable between $70/b and $73/b, from August 2018 through the end of 2019. EIA estimates that U.S. crude oil production averaged 10.8 million barrels per day (b/d) in July, up 47,000 b/d from June.

“Because crude oil production is forecast to be lower in 2018, it lowered the overall output forecast for 2019,” said Tim Hess, a product manager for the EIA’s Short-Term Energy Outlook. “The lower forecast for output this year reflects slightly slower than expected growth in middle quarters of this year, possibly related to pipeline constraints out of the Permian basin that have reduced wellhead prices in the region.” 


Mexico to Spend $11 Billion on Refineries

“Mexican President-elect Andres Manuel Lopez Obrador said his administration will invest more than $11 billion to boost refining capacity in order to curb growing fuel imports,” Reuters  reports.

Lopez Obrador told reporters “his government plans to invest $2.6 billion to modernize existing domestic refineries owned and operated by national oil company Pemex and spend another $8.4 billion to build a new one within three years.” 

Pipeline Constraints Cause Natural Gas Prices to Drop

“The natural gas price in the Permian Basin in west Texas has slumped so low this year that the annual average is on track for its lowest in 19 years, pummeled by record production and pipeline constraints that also have stymied crude transport out of the region,” Reuters  reports.

“Gas production, a byproduct of drilling in the nation’s largest oilfield, has hit record highs this year, filling available space on existing pipelines and forcing more companies to burn off, or flare, the fuel if they cannot find other ways to deal with it.” 

U.S. Refineries Running Near All-Time Highs

For the week ending July 6, 2018, the four-week average of U.S. gross refinery inputs surpassed 18 million barrels per day (b/d) for the first time on record. U.S. refineries are running at record levels in response to robust domestic and international demand for motor gasoline and distillate fuel oil.

Despite record-high inputs, refinery utilization has not surpassed the record set in 1998. Rather than higher utilization, refinery runs have increased with increased refinery capacity. U.S. refinery capacity increased by 862,000 barrels per calendar day (b/cd) between January 1, 2011, and January 1, 2018. 

U.S. LNG Exports to China Decline

“U.S. exports of liquefied natural gas (LNG) to China in July fell to their lowest level in a year and are expected to decline further as the Sino-U.S. trade dispute forces utilities to seek alternative supplies,” Reuters reports.

“The main beneficiaries of this shift are producers in the Asia/Pacific region, who have been quick to snatch market share from the United States since the trade disputes broke out in June.” 

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