Economic activity in the US has slowly started to recover but it is too soon to assess its pace. During the last three weeks crude oil and gasoline demand-supply also started to signal a slight recovery. This has been mainly through a combination of lower than expected build-ups in crude oil stocks and a small increase in gasoline volumes supplied to market.
US crude oil production has intensified its reduction pace and to date it stands at 11.6 million barrels per day (mmbd) versus almost 13 mmbd at beginning of March 2020. The bulk of the output decrease comes from the USL48 onshore unconventional shale plays where the months of April and May have experienced a cumulative loss of an estimated 1.3 mmbd.
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In spite of the production cuts, crude oil stocks continue to build up but at much lower rate. During the week ending May 8 total crude oil stocks, which include the strategic petroleum reserve, added only 1.1 million barrels and commercial stocks actually showed a withdrawal of 745 thousand barrels. As a comparison, the average stock build up during the month of April was about 15 million barrels every week. Storage at Cushing, OK remains at 79% but with a lower weekly build up in comparison to previous weeks. This has helped relieve pressure on the West Texas Intermediate (WTI) prices related to lack of storage. It was previously expected for the full operating storage capacity at Cushing, OK to be reached by second half of May.
Refinery crude oil intake remains 3.5 mmbd lower than in early March 2020 and 4 mmbd lower than May 2019. The intake capacity has however stabilized in between 12.4 to 12.9 mmbd during the last five weeks. Gasoline supplied to market has increased during the last 4 weeks but more importantly, gasoline stocks have continuously decreased every week during the last three weeks at an average of 3.4 million of barrels.
The steep fall in WTI price has had a significant impact on the rig count bringing it down by approximately 53% or 422 rigs from early March to date. Although rigs were idled immediately after the price crashed in mid-March, the effect in production is starting to be felt during April and May. However now there is also a reinforced impact due to a large number of producing wells being shut-in across different US unconventional plays.
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By GlobalDataSome operators in USL48 continue to report capex reductions, which will also affect 2021 production. In fact, the expected drop for 2021 with respect to 2019 on an annual basis is estimated to be at least two times the drop seen in 2020, or more than 1 mmbd.
