Daily Energy Report

Global oil inventory remain high, Australian LNG strike ends, Oil exploration future, Solar eclipse to hit grids, NE US wind bailout, phase out of FF is “unrealistic,” and mo

Chart of the Day: Global Oil Inventories Remain High 

Summary

Figure (1) shows global crude oil inventories since the beginning of 2022, just before the Russian invasion of Ukraine. As the chart shows, most inventories, which include Strategic Petroleum Reserves (SPR), are in three countries—China, the US, and Japan. The decline from the beginning of 2022 until last week is only 139 mb, and that includes the 211 mb that the US withdrew from the SPR in 2022 (including the Biden 180 mb withdrawal and the congressional-mandated withdrawals).

EOA’s Main Takeaway

The decline in inventories wiped out all the build that resulted from the lockdowns in 2020 and it is slightly below 2019 levels. The decline was caused by withdrawals from the SPRs by 244 mb, mostly in the US.

China added about 50 mb to its SPR. Between the beginning of 2022 and now, commercial crude inventories increased by more than 100 mb. No doubt that some of the SPR ended up in commercial inventories directly or indirectly.

The bottom line is that inventories have not declined enough to sustain prices at current levels.  Saudi cuts might continue for a while to maintain current prices. The only way they can do so is if they maintain the price backwardation in Brent. Oil prices are literally in the hands of Saudi Arabia now.

Story of the Day

Reuters: Strikes End at Chevron’s Australian LNG Facilities

Summary

An Australian union alliance halted strikes at Chevron's two major local LNG projects, Gorgon and Wheatstone, potentially impacting about 7% of global LNG supplies. Both parties agreed to settle disputes over pay and conditions proposed by the country's industrial arbitrator. The strikes, which began two weeks ago, had raised LNG prices by up to 35% in August. No LNG shipments were disrupted during the strikes.

EOA’s Main Takeaway

Natural gas and LNG prices in Asia and Europe are expected to decline. It remains to be seen if some Asian companies will cancel LNG orders they made in recent days for fear that the strike would last for a few more weeks. If they cancel, gas prices will decline everywhere.

Figure (2) shows the customers who were DIRECTLY affected by the strike. For more, click here.

News of the Day

Baker Hughes: US RIG COUNT Declined by 11 rigs

Summary