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Wednesday, July 3, 2019

June 2019 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil dipped further in June, falling by $6.17 (-10.1%), to $54.66 per barrel. The decrease occurred within the context of a marginally weaker U.S. dollar, the lagged impacts of a 92,000 barrel-per-day (BPD) drop in the amount of oil supplied/demanded during April (to 20.1 million BPD), and little net change in accumulated oil stocks (June average: 476 million barrels). 
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From the 1 July 2019 issue of Peak Oil Review:
After a week of rampant speculation about what could happen at the G20 summit that would affect oil prices, the announcement on [29 June] that the US and China have agreed to keep the current tariffs in place for now and would resume trade negotiations left the situation about where it has been for months.  President Putin announced that Russia and its friends would join Saudi Arabia in extending the OPEC production cut for another six to nine months eliminating the drama from the formal OPEC+ meeting that will take place early this week.  Oil prices were up a bit for the week settling at $64.74 in London and $58.47 in New York.
Although an end to the US-China trade dispute is nowhere in sight, the G20 announcements suggest that the situation is under control at the minute and that tariffs which could lead to an economic recession are on hold.  Likewise, the extension of the OPEC+ agreement until next year should prevent another 1 million b/d of crude being dumped on the market forcing prices down.  On Sunday, an editorial in the official China Daily warned while there was now a better likelihood of reaching an agreement, there's no guarantee there would be one.  "Things are still very much up in the air."
US Shale Oil Production: US crude oil output in April rose to a new monthly record of 12.16 million b/d, according to the EIA's Petroleum Supply Monthly which was released on Friday. 
There are numerous reports that most shale oil drillers, except perhaps for the major oil companies, are cutting back on opening new wells to mollify their financial backers.  It seems unlikely that the shale oil industry will be able to increase production by 83 thousand b/d in June and 70 thousand in July as projected by the EIA.
A recent survey by the Dallas Federal Reserve reveals that oil industry executives are unusually pessimistic about the prospects for the future.  A combination of low oil prices, increasing costs, and the lack of investor willingness to fund losing firms suggest that the era of rapid increases in shale oil production may be coming to a close. 
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Selected highlights from the 28 June 2019 issue of OilPrice.com’s Oil & Energy Insider include:
U.S. to assemble naval watch in Persian Gulf. The U.S. is hoping to enlist other nations in an effort to keep an eye on the Persian Gulf, according to the Wall Street Journal. The U.S. would contribute ships and aircraft but operational control would be headed by another nation. The plan aims to present deterrence to Iran, securing oil shipment lanes through the Strait of Hormuz.
Philadelphia refinery set to close. Philadelphia Energy Solutions may permanently shut down its damaged refinery, decimated from a series of explosions last week. PES may try to sell the complex as well.
Drillers use gas for electricity. Permian drillers are beginning to use some of their surplus gas to power their operations, a practice that will save on costs, reduce flaring and emissions, according to Bloomberg.
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.

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