Crude oil prices are taking a breather after a brief plunge which took place in the market due to the considerable impact of the COVID-19 outbreak over the global economy. Not just oil, many other consumption-based commodities such as base metals like copper and nickel, witnessed a somewhat similar pattern in the price action.
However, there is another story in the crude oil movement, i.e., the ongoing tug-of-war between the oil kingpin Saudi Arabia and Russia. In the status quo, Russia jettisoned its support to the production cut instigated by OPEC to support the crude oil price, in fear of losing the market share, and the fear seems to be coming into the picture with weekly production of crude oil across the United States reaching another record high of 13,100 thousand barrels a day for the week ended 28 February 2020, which the nation has been able to uphold so far.
Whilst the domestic production across the United States is large, the local refineries across the nation still prefer heavy crude from OPEC and Russia, whose crude is somewhat sweeter when compared to OPEC’s, which suggests that the large domestic oil production across the United States could be more problematic for the oil market share of Russia, as the U.S. crude is sweet, rather than OPEC, whose oil is still favoured by U.S. refineries.
Due to the large installed heavy crude refining capacity of local refineries the United States refineries favour the OPEC crude oil.
Crude Rising On Fundamentals or its Pocket Filling For Short-sellers
- United States Oil Trade Figures
The United States domestic crude oil production is averaging around a record high of 13.0 million barrels a day (YTD), and the nation is very well upholding the run rate for quite some time with slight variations.
Data Source EIA
While the domestic production across the United States is inching up, the oil export from the country is surging with a rise in import, suggesting that the demand for OPEC crude is slightly recovering across the United States, which could be a possible reason for a slight recovery in oil prices.
Data Source EIA
The total crude oil imports for the week ended 13 March 2020 stood at 6,539 thousand barrels a day, up by 1.98 per cent against the previous week, and the total crude oil exports from the United States for the same week stood at 4,378 thousand barrels a day, up by 28.38 per cent against the previous week.
The rise in import with a steady overall crude input of 15,806 thousand barrels a day for the week ended 13 March 2020, up by 119,000 barrels a day against the previous week, along with a stable utilisation rate of 86.9 per cent suggested that the OPEC crude oil demand across the United States surged slightly, which in turn, support the crude oil prices.
- United States Oil-Product Demand
The depletion of domestic oil-product inventories could explain the rise in imports. As per the weekly data from the Energy Information Administration, the total motor gasoline inventories for the week ended 13 March 2020 fell by 6.2 million barrels to bring the overall inventory near the five year average for this time of year. Likewise, the distillate fuel inventories decreased by 2.9 million barrels for the same period, which reflected an 11 per cent decline from the five-year average for this time of the year.
The data from EIA further suggested that the total commercial petroleum inventories decreased by 7.7 million barrels (for the week ended 13 March 2020), while total oil-product shipment recovered slightly by 0.3 per cent for the same period to average at 21.1 million barrels a day.
The overall shipment of oil products from the United States surged for the week ended 13 March 2020, with motor gasoline supply averaging 9.3 million barrels a day, up by 2.1 per cent against the previous corresponding period.
However, jet fuel product shipment declined on a weekly basis for four consecutive weeks, due to the slowdown in travel industry amid the travel policies adopted by the various government in the wake of the COVID-19 outbreak.
While the demand for foreign crude across the United States surging, the nation is considering measures to beat the competition and expanding its crude reach to Europe and Asia, including extending ban on Russia, as mentioned by few media houses. In the recent statement, the United States President Donald Trump mentioned that “We are trying to find some kind of a medium ground,” referring to the ongoing fight between Saudi and Russia for the global oil market share.
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