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Petroleum Report: Saudi & U.S. Production Pressure Pricing

November 15, 2013
By: Davis Michaelsen, Pro Farmer Inputs Monitor Editor

Unplanned global petroleum supply disruptions added up to a record high of more than 3 million barrels per day. Libyan production had been making good strides after civil discord hampered production and exports. But Libyan production has again slipped and is down 80% from the 2013 high in April of 1.5 million barrels per day as political crisis rules the day. Libya alone accounts for nearly half of the current unplanned outages.twip131114fig1 lg

Planned maintenance and unplanned outages have also reduced Iraqi production dramatically. Here again, political dissidence and assaults on pipelines put a kink in the Iraqi oil hose to the tune of a 400,000 barrel per day reduction which may last into 2014.

To fill the gap, Saudi production has remained at elevated levels and increased light sweet production in the U.S. has freed up light sweet crude in the global marketplace. That light sweet crude is product that the United States used to import from destinations including Nigeria. That Nigerian supply can now help fill the gap for Iraqi and Libyan producers, rather than being sent to the U.S.

Even as disruptions reach record levels, Saudi and U.S. production have successfully moderated the price by maintaining global supplies. The result has been blooming supplies in U.S. storage, and cheaper gasoline.

Crude Oil --

January 2014 WTI crude oil opened today at $94.53. Resistance lies at $98.82 and $100.95. A violation of those levels would make $109.00 bulls next target. Next support is at $92.67 and below that, $91.25. A violation of these levels would suggest downside potential to April 15's low at $85.61.

U.S. crude inventories firmed 2.6 million barrels to 388.1 million barrels -- now 12.2 million barrels above year-ago. crstuss

January 2014 Brent crude oil futures opened today at $107.77 and spent most of the day chopping sideways. Next support lies at $105.39 and $105.16. A move below those levels would suggest downside potential to $105 and psychological $100. Resistance lies at $109.26 and $110.65.

The WTI/Brent crude spread widened $1.10 on the week to $13.24 at the open, with Brent on top.

winter morning 2 l

 

Home Heat --

  • Residential heating oil down a penny on the week to $3.82.
  • Wholesale heating oil also down a penny to $2.99/gallon.
  • Residential propane up 4 cents to $2.49.
  • Wholesale propane up 2 cents to $1.38.

 

Fuels --

Gasoline, Highway Diesel and #2 all softer on the week.

The U.S. average retail price of regular gasoline decreased seven cents to $3.19 per gallon as of November 11, 2013, 26 cents lower than last year at this time and the lowest price since February 21, 2011. Prices fell in all regions of the nation for the third consecutive week, with the largest decrease coming in the Midwest, where the price declined 11 cents to $3.07 per gallon. The Rocky Mountain price was $3.23 per gallon, eight cents lower than last week. Dropping six cents, the West Coast price was $3.51 per gallon. The Gulf and East Coast prices were a nickel lower, at $2.98 per gallon and $3.24 per gallon, respectively, according to EIA.

The national average diesel fuel price fell three cents to $3.83 per gallon, 15 cents lower than last year at this time. The West Coast price was below the $4 per gallon mark for the first time since July 15, 2013, at $3.98 per gallon and four cents lower than last week. The Midwest price declined three cents to $3.80 per gallon, and the East Coast, Gulf Coast, and Rocky Mountain prices all decreased two cents, to $3.86 per gallon, $3.75 per gallon, and $3.84 per gallon, respectively, according to EIA.Picture1

Farm Diesel softened 2 1/2 cents on the week, currently at $3.422. We have added EIA's home heat report which runs Oct. 1-March. Farm diesel is in direct competition with #2 heating oil through the winter months and a stress on #2 supplies will impact farm diesel pricing. This week's lowest farm diesel was reported in the state of Nebraska at $3.22/gallon with the high mark in Illinois at $3.59.

Propane --

Total U.S. inventories of propane decreased last week by 1.3 million barrels to end at 60.8 million barrels, 12.4 million barrels (16.9%) lower than a year ago. The Midwest region led the decline, falling by 0.8 million barrels. Gulf Coast regional stocks fell by 0.5 million barrels. East Coast and Rocky Mountain/West Coast stocks were both up slightly.

Propylene non-fuel-use inventories represented 5.0% of total propane inventories, according to EIA.disstuss

LP moved 5 3/4 cent higher in this week's Inputs Monitor Index to $1.641. The lowest priced LP in our index is in South Dakota at $1.38 while the high mark is at $2.07 in Michigan.

Distillate --

The national distillate supply fell 0.5 million barrels to 117.3 -- 1.8 million barrels below year-ago.

 

 


Graphs and indicated text provided by EIA.

Photo credit: blmiers2 / Foter.com / CC BY-NC-SA

 

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