February 2019 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil gained for a second month when rising by $3.58 (+7.0%), to $54.95 per barrel in February. The increase occurred within the context of a stronger U.S. dollar, the lagged impacts of an 69,000 barrel-per-day (BPD) rise in the amount of oil supplied/demanded during December (to 20.5 million BPD), and stability in accumulated oil stocks (monthly average: 450 million barrels). 

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From the 4 March 2019 issue of Peak Oil Review:

“The struggle between lower crude output and the prospects for a global economic setback that could reduce the demand for oil continued last week.  Prices rose on bullish news early in the week and then fell to close only slightly higher for the week at $55.80 in New York and $65.07 in London.  Most analysts are predicting that oil prices will continue to rise as the case for lower production later this year seems stronger than the case for lower demand.

“For some time now analysts have been noting that for the last few years, global oil production outside of the US has been generally stagnant. While oil prices have varied during this period, they have not spiked due to the spectacular increase in US shale oil production.  In recent years the demand for oil has been increasing at about 1.5 million b/d each year which has been satisfied by US production.  Unless there is a global economic recession or a substantial increase in oil prices, demand for oil seems destined to continue increasing for the foreseeable future despite growing concerns about carbon emissions.

“Currently, there is no evidence that a spectacular jump in global oil production is in the offing and new oil discoveries remain well below the world’s annual oil consumption of some 36 billion barrels per year.

“Leaving aside the concerns about carbon emissions, the heart of the global oil availability issue in the immediate future seems to center on whether US shale oil production can keep growing. The government and the oil industry say that it can; qualified outside observers say it is highly unlikely that it will.  We are likely to be entering a period of considerable uncertainty and volatility of oil prices.” 

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Selected highlights from the 3 March 2019 issue of OilPrice.com’s Oil & Energy Insider include:

Wall Street unsatisfied with oil majors. Investors are souring on the oil majors, according to the Financial Times. The majors face both short- and long-term headwinds, including low oil prices stemming from abundant U.S. shale supply combined with the long-term fears of peak oil demand. “There’s just this hate for this commodity right now,” Bernstein analyst Bob Bracket told the FT. That could affect how the industry proceeds going forward. “The structural challenges the industry faces aren’t going to go away, so energy companies of all sizes need to clearly articulate how they will allocate investors’ capital and prioritize shareholder returns in a manner that rebuilds confidence,” Nick Stansbury of Legal & General Investment Management told the FT.

Oil prices up 25 percent so far this year. The oil market has seen its strongest start to a year in recorded history, with prices gaining more than 25% in two months. The increases, analysts say, are due to the Fed backing off interest rate hikes, combined with the OPEC+ cuts and turmoil in Venezuela and Iran.

Permian pipelines hit regulatory delay. Two Permian pipelines seen as critical to relieving the midstream bottleneck have seen some regulatory delays from the U.S. Federal Energy Regulatory Commission (FERC). The Cactus II pipeline (585,000 bpd of capacity) and the EPIC pipeline (550,000 bpd) are among two of at least 15 projects that are held up at FERC. Their operators still expect to put them into service on time later this year.

Fracking activity contracted in December. According to Rystad Energy, the average number of daily fracking jobs in the U.S. fell to 36 in December, a decline of 25 percent compared to the period between May and August. “There is no doubt that significant part of this decline was driven by seasonal weather and capital constraint factors. Yet we keep hearing about somewhat disappointing pace of post-winter recovery,” Rystad said in its report.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.