Latest news on Crude Oil

Why is the oil sector growing so fast? Despite international efforts to promote increased use of renewable energy and electric vehicles, high prices and rising demand have allowed U.S. oil producers to record profits.

Despite the attention being paid to a shift in energy sources, the US oil industry is expanding and is producing more crude than ever from West Texas’ subterranean shale rock.

After years of financial losses due to the use of hydraulic fracturing and horizontal drilling, the companies that propelled the US to become the world’s top oil producer have now turned the corner and are generating healthy profits. Certain oil and gas companies, like Diamondback Energy and Exxon Mobil, have record-high stock prices.

Market forces have played a major role in the industry’s recovery following severe losses during the Covid-19 pandemic, although Russia’s war in Ukraine has also contributed. Since early 2021, the average price of U.S. oil has been around $80 per barrel, up from about $53 in the four years prior.

It appears that the transition to renewable energy and electric vehicles will be more difficult and take longer than some climate activists and world leaders had initially anticipated, given the high price and demand for oil.

China’s oil sector struggles amid rising crude inventories

The Chinese crude oil market is clearly in poor shape. The largest importer in the world has not only seen a decrease in arrivals during the first half of the year, but it has also increased the volume added to stockpiles. In June, China increased its commercial or strategic oil reserves by 1.48 million barrels per day (bpd) due to a decrease in refinery capacity that exceeded the import of soft crude. China filled storage tanks with about 900,000 barrels per day in the first half of 2024. In recent months, this amount has increased.

The International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) have released 2024 demand forecasts that remain optimistic despite the tepid imports and growing volume of inventory builds. The amounts of crude that enter and exit China’s commercial and strategic reserves are not publicly available, but one can estimate them by subtracting the amount of processed crude from the total amount of crude that is accessible from purchases and domestic production.

With 11.30 million barrels of imports and 4.37 million barrels of domestic production, the total amount of crude accessible to producers in June was 15.67 million barrels. Official data released mid-July July showed that the total amount of oil handled by refiners was 14.19 million bpd, down 3.7% from June 2023. The total amount of crude that was available for use in the first half of 2024 was 15.34 million bpd, while the output of refineries was 14.44 million bpd.

This represents an increase from the 790,000 bpd for the first five months of 2024 to 900,000 bpd less crude processed by refiners than what was available to them. There is no indication that demand is increasing, and the overall picture of the Chinese oil sector is one of weakness. The first half of the year saw 11.05 million barrels of crude oil imported, a 2.9% decrease from the 11.38 million barrels recorded during the same period in 2023.

Oil prices drop with dollar’s rise after Trump’s attack

The middle of July saw a decline in oil prices as investors monitored the negotiations for a Gaza ceasefire while the dollar strengthened amid political unrest following an attack on US presidential candidate Donald Trump.  Brent crude futures dropped by 55 cents on Monday (15 July), or 0.7%, to $84.48 a barrel by 0109 GMT.

West Texas Intermediate crude was down 56 cents, or 0.7%, to $81.65 per barrel. The dollar strengthened and U.S. bond futures declined as investors speculate that Trump’s attempted assassination will increase the likelihood of winning the next presidential election.

“The (U.S. dollar) is expected to be a beneficiary of the assassination attempt on former President Trump as it increases the chances of his re-election,” Tony Sycamore, an IG market analyst, said. Because buyers paying in other currencies must pay more for their dollar-denominated crude, a stronger dollar generally results in lower oil prices. After four weeks of gains, Brent dropped more than 1.7% last week, while WTI futures dropped 1.1% as the world’s largest oil importer, China, countered robust summer consumption in the United States.

Rising oil prices fueled by cooling US inflation and high demand

Early Asian trading hours saw an increase in oil prices as investor confidence was boosted by indications of robust summer demand and a reduction in inflationary pressures in the US, the world’s largest oil market.

According to government data, the demand for gasoline in the United States during the week ending 5 July was 9.4 million barrels per day (bpd), the highest level for a week that included the Independence Day holiday since 2019. On a four-week average, the demand for jet fuel reached its highest point since 2 January.

Prices were supported as U.S. refiners increased output and drew from reserves of crude oil due to strong fuel demand. According to government data, the net input of crude oil by U.S. Gulf Coast refiners increased last week to over 9.4 million bpd for the first time since January 2019.

Fuel stocks rise while crude inventories fall again

The American Petroleum Institute (API) reports that for the week ending 12 July, crude oil inventories in the US dropped drastically by 4.44 million barrels. The API announced a 1.9-million-barrel draw in crude inventories for the previous week. The API-estimated crude oil inventory draws this week represent the third consecutive week of such draws, totaling 15.5 million barrels lost.

As of 12 July, the Strategic Petroleum Reserve (SPR) had 0.6 million more barrels of crude oil in its inventory, according to a report released by the Department of Energy (DoE). Though still far less than the 656 million barrels in June 2020, inventories are currently at 373.7 million barrels, the highest level since December 2022.

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