The Phil Flynn Energy Report
Covid Crash Wave 2
The crude oil market is in a second wave feeding frenzy that raised the fear indexes and hurt oil. Yet, it looks like Tuesday is offering hope for a rebound, as we should see a drop in U.S. crude oil inventories as well as more production shut-ins due to Hurricane Zeta.
Chevron Corp and B.P. have evacuated staff from their U.S. Gulf of Mexico offshore facilities ahead of the storm. The Bureau of Safety and Environmental Enforcement (BSEE) has activated the Hurricane Response Team as Tropical Storm Zeta makes its way towards the Gulf of Mexico. The BSEE estimates that approximately 15.87 percent of the Gulf of Mexico's current oil production has been shut-in. BSEE estimates that roughly 6 percent of the Gulf of Mexico's natural gas production has been shut-in.
That could impact supply as the U.S. has been a go-to for cheap oil. Reuters reported that "China's crude oil imports from the United States rose to a record high in September, while Brazil jumped to become the country's third-biggest supplier, data showed. In September, U.S. shipments soared to 3.9 million tonnes, spurred by low prices and a trade deal between Beijing and Washington, data from China's General Administration of Customs showed. That beats July's previous record of 3.67 million tonnes and is more than double the year-ago level.
Brazil hit 4.49 million tonnes, up from 2.96 million tonnes a year earlier; Brazil overtook Iraq, which fell to the fifth-biggest supplier, while the United States took the fourth spot. China's January-September imports from Brazil were 33.69 million tonnes, up 15.6% from a year earlier. China takes 70% of Brazil's oil exports, the country's state oil firm Petrobras said in July. According to Refinitiv trade flows, China should receive around 6.21 million tonnes of U.S crude oil in October-November.
Saudi Arabia regained the top spot in China's oil purchases last month after losing that rank to Russia for the previous two months, the data showed. The kingdom's imports were 7.78 million tonnes, equivalent to 1.89 million barrels per day (BPD), up from August's 1.24 million BPD. According to Reuters calculations, Russia supplied 7.48 million tonnes last month, or 1.82 million BPD, up 18.6% from a year earlier and up 32.8% from August. For the first nine months of 2020, Russia remained the top seller with supplies totaling 64.62 million tonnes, 16% above the year-ago level. Saudi Arabia trailed at 63.57 million tonnes, which was 6.5% higher on the year.
China snapped up 13% more crude in the first nine months than a year earlier, as refiners ramped up production to meet speedy demand recovery from the pandemic and stock up at record rates on cheap oil.
Reuters reported that U.S. natural gas futures climbed to their highest in nearly two years on Monday on forecasts for higher heating demand and concerns that a storm could disrupt Gulf Coast production. Front-month gas futures rose 8.8 cents, or 3%, to $3.059 per million British thermal units (mmBtu) by 9:44 a.m. EDT. Prices earlier rose to their highest since January 25, 2019, at $3.080 per mmBtu. "We are seeing some frigid weather temperatures that will be coming across in the next week, so we are going to see some robust demand," said Phil Flynn, a senior analyst at Price Futures Group in Chicago.
Data provider Refinitiv predicted 212 heating degree days (HDDs) over the next two weeks in the Lor 48 U.S. states, higher than the 30-year normal of 204 HDDs. HDDs measure the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius) and are used to estimate demand to heat homes and businesses. Refinitiv projected average demand would jump from 97 BCFD this week to 97.4 BCFD next week.
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