Peak Oil Notes – Mar 5

March 5, 2015

Oil prices have been volatile this week as traders attempt to fathom whether prices are stabilizing due to increasing demand, and eventually falling production, or will undergo another significant drop before rising next summer. At the close Wednesday New York futures were up a bit for this week, largely because stocks at Cushing, Okla. did not increase as much as traders had anticipated, closing at $51.53. London oil closed at $60.55 on Wednesday as the violence in Libya subsided a bit and oil tanks were no longer under attack. The Libyan oil company announcement that production was now up to 500,000 b/d helped to lower prices  in London a little.
 
The WTI/Brent spread narrowed from circa $10 a barrel on Tuesday to $9 a barrel on Wednesday causing those traders who were betting on the spread widening to cash out pushing up New York prices.
 
This week stocks’ report says the US crude inventory was up by 10.3 million barrels, double what analysts had been expecting; US domestic crude production was up by 39,000 b/d last week though this may just be a EIA projection; and gasoline stocks were up by 46,000 barrels vs. analyst estimates of a 1.8 million barrel drop.
 
The hot issue at the minute is if and when US storage capacity will top out, forcing prices down as a real oil glut develops. It seems likely that refiners currently are moving crude faster from Cushing to the Gulf Coast as Coast stocks hit a record of 220 million barrels last week while Cushing was only up by 536,000 barrels.
 
The EIA reported that utilization of US crude storage capacity was 60 percent of capacity late last month vs. 48 percent at this time last year. The Agency also put the key storage facility at Cushing, Okla. at 67 percent of capacity, but there are questions as to whether engineering considerations will allow the facility to be filled much higher. Some in the financial press are saying that US crude storage facilities will be at capacity in the next few weeks.
 
The Saudi oil minister reiterated again on Wednesday that his country would not cut production in the foreseeable future. 

Tom Whipple

Tom Whipple is one of the most highly respected analysts of peak oil issues in the United States. A retired 30-year CIA analyst who has been following the peak oil story since 1999, Tom is the editor of the long-running Energy Bulletin (formerly "Peak Oil News" and "Peak Oil Review"). Tom has degrees from Rice University and the London School of Economics.  

Tags: oil prices, oil production