Reuters reports that Iraq is seeking an exemption from an OPEC+ deal curbing oil production during the first quarter of 2021 but will adhere to the cuts over the next three months, Oil Minister Ihsan Abdul Jabbar said on Wednesday. That news seemed to offset a bit a very bullish American Petroleum Institute (API) report. The API not only reported that U.S. crude oil supply fell by 6.36 million barrels but a massive 5.76 million-barrel drop in gasoline inventory that could suggest that the gasoline market will continue to tighten and start to raise pump prices. To cap off the report, we also saw a 1.42 million drop in distillate supply that, if confirmed by the EIA, should give the market a chance to beat the seasonal forces working against it and start to breakout higher.

Part of the U.S. big crude draw was due to demand and falling U.S. oil production but also the fact that Saudi-Arabia has cut oil supply to the U.S., as we have noted. Bloomberg reported today that, “The kingdom last month loaded about 5.6 million barrels a day on to tankers, a small increase from July, vessel-tracking information compiled by Bloomberg show. Within that, an ever-smaller share went to the U.S., and cargo data show that deliveries in the week ended August 28 dropped to what could be the lowest in decades. For Saudi Arabia, cutting oil shipments into the U.S. is the quickest way to telegraph to the broader market that it’s tightening supply. The U.S. government is alone among major oil-consuming nations in publishing weekly data on crude stocks and imports, which carries enormous influence among oil traders. Those figures will be released later on Wednesday.

Saudi crude exports to the U.S. dwindled to about 177,000 barrels a day in August, tracking data shows. Although that number could rise as more vessels indicate the final destination, it’s still a fraction of the 1.3 million barrels a day the kingdom shipped to America in April, when the flow threatened to upend the U.S. oil market, according to Bloomberg.

Russia is tapering oil cuts. Russian August oil production was 9.86 million barrels a day, up 5.1% from July but still down 12.8% from last year.

Nat gas is in cool-down after a hot August. Forecast for a cool September is the main culprit. Myra P. Saefong of Marketwatch writes, “rallied in August, tacking on nearly 50% to tally their largest monthly percentage gain in more than a decade as strong demand for the fuel in power generation significantly cut U.S. supplies in storage. In March, U.S. inventories of natural gas were 81% higher than the same a time year ago, but supplies recently stood at 20% above the one year-ago level, according to Peter McNally, global sector lead for industrial materials and energy at investment research firm Third Bridge. The “need for backup power and peaking power demand” increased in the short term, amid blackouts in California, lifting usage of natural gas, he says. On Aug. 31, October natural-gas futures NGV20, -2.53% settled at $2.63 per million British thermal units, with front-month prices climbing by roughly 46% for the month to date. They posted the largest one-month percentage rise since September 2009, when prices rose 62.6%, according to Dow Jones Market Data. Prices saw a big increase at the beginning of August, buoyed by “strong demand from natural gas-fired power generation,” according to a monthly report from the Energy Information Administration released on August 11th. The EIA estimates that natural-gas consumption for power generation rose to 43.6 billion cubic feet per day in July 2020, “higher than any month on record.”Still, a decline in industrial natural-gas consumption, which fell by 1.4 billion cubic feet per day in July from a year earlier, likely due to slower economic activity, partially offset strength in consumption from electric power, the EIA said.
Thanks,
Phil Flynn

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