UPDATE 1-US crude stocks decline, Cushing glut grows -EIA

31 Dec 2014 | Author: | No comments yet »

Crude Extends Losses on Rising Inventories at Cushing.

U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending December 26, 2014, 36,000 barrels per day more than the previous week’s average.Oil extended the largest annual decline since 2008 as the Energy Information Administration said crude stockpiles at Cushing, Oklahoma, fell last week.

Inventories at the delivery point for New York Mercantile Exchange futures jumped 2 million barrels to 30.8 million, the most since February, the EIA said. U.S. commercial crude inventories decreased by 1.8 million barrels last week, maintaining a total U.S. commercial crude inventory of 385.5 million barrels. Global benchmark Brent crude has fallen 49 percent in 2014 as demand growth slowed, the United States expanded output and OPEC, dropping its strategy of trimming supply to keep oil around $100 a barrel, chose instead to defend market share. On Wednesday, prices came under pressure from a survey showing China’s factory sector shrank for the first time in seven months in December—a bearish indication on the strength of oil demand in the world’s second-largest consumer.

Not only has the highly publicized Keystone XL pipeline been significantly delayed, but other important projects in Canada, including the Northern Gateway, the Trans Mountain expansion and Energy East, are also at risk, due to a lengthy approval process involving hundreds of conditions. Total motor gasoline supplied (the EIA’s measure of consumption) averaged about 9.3 million barrels a day for the past four weeks, up by 4.6% compared with the same period a year ago. Brent for February settlement fell $1.15, or 2 percent, to $56.75 a barrel on the London-based ICE Futures Europe exchange after touching $55.81, also the lowest since May 2009. In contrast, OPEC at a Nov. 27 meeting this year decided against a cutback to defend its market share against shale oil and other competing supply sources, despite its own forecasts of a growing surplus in 2015.

Oil has slumped as U.S. producers and the Organization of Petroleum Exporting Countries ceded no ground in their battle for market share amid a supply glut. Turmoil in Libya has effectively led to a drop in OPEC supply in December to a six-month low, a Reuters survey showed on Tuesday, although forecasts still point to a large excess supply next year. The Obama administration on Tuesday bowed to months of growing pressure over a 40-year-old ban on exports of most domestic crude, taking two steps expected to increase the flow of ultra-light oil, or condensate, onto the global market. It’s interesting to see whether OPEC will continue to take no action.” The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

President Barack Obama’s administration opened the door for expanded oil exports by clarifying that a lightly processed form of crude known as condensate can be sold outside the U.S. What is needed is swift government action to reduce bureaucracy and roadblocks that, in the end, only result in a negative impact on the environment and the economy. Before the EIA report, West Texas Intermediate (WTI) crude for February delivery was trading down about 1.7% at around $53.20 a barrel Wednesday morning. The publication of guidelines by the Commerce Department’s Bureau of Industry and Security yesterday is the first public explanation of steps companies can take to avoid violating export laws. The inventory decline for crude likely indicates that refineries are holding off on more purchases until they run some of the more expensive crude at the bottom of their tanks before refilling with the current lower price oil.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.257, down from $2.353 a week ago and from $2.776 a month ago. But with several of them involved, cooperation and swift action are needed to enable an appropriate response from railroad operators and tank car manufacturers.

The faster we move to deploy pipeline projects and rail standards, the quicker we reach a state that reaps both the economic and environmental benefits of an effective crude logistics network.

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