- The US is exporting far less oil than it was in 2019, and crude oil prices have seen a steady decline.
- US oil rig counts are down more than 70%, but demand remains the critical factor.
By Bob Iaccino for CME Group
In 2019, the US imported about 6.8 million barrels per day (bpd) of crude oil and exported about 3 million bpd of crude oil, according to the US Energy Information Administration (EIA). However, those figures are going to change as the global slowdown affects not only US supply, but global demand.
Already in June 2020, the US imported 27,885 fewer barrels than the same month last year and exported 347,000 barrels less, all according to data from the EIA.
“If you look at the supply/demand structure for the US export market, it’s extremely fragile, with the demand picture quite fluid,” says Phil Streible, chief market strategist at Blue Line Futures. “Exports peaked in March, and these were most likely orders or commitments made pre-pandemic, and they’ve come down significantly from then.”
Even though US rig counts are down more than 70%, demand still seems to be the main factor in this new dynamic.
Seasonality reflects demand
It is reflected in seasonal price patterns as well. Since 2000, WTI crude oil futures prices have risen from January 1 through August 31 16 of 20 times, reflecting the anticipation and the reality of increased demand from the summer driving season. In 2020, prices were down in that period 30.8%. Erik Norland, senior economist at CME Group, is more concerned, however, about the coming effects of winter on total global demand.
“What really concerns me going forward with regard to seasonality, is looking ahead to Q4. As we move into the northern hemisphere’s winter, the northern hemisphere is where 90% of the world’s population lives,” Norland says. “The evolution of the pandemic over the next few months I think is going to have a really big impact on oil demand one way or the other as we move into the fourth quarter which is typically much weaker quarter in terms of demand.”
OPEC and supply
Norland says “OPEC, Russia, and the US are all very much in the same boat” when it comes to cutting production, but the production drop in the US may be tougher to bring back online. OPEC+ takes center stage in the short term, as they manage their production agreements, and considering there are two more OPEC meetings in 2020, those may be the definitive events for oil prices going forward.
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This post was created by CME Group with Insider Studios.