July 2020 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil pared gains during July when rising by $2.40 (+6.3%), to $40.71 per barrel. The July increase occurred within the context of a slightly weaker U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of a 1.4 million barrel-per-day (BPD) jump in the amount of petroleum products demanded/supplied during May (to 16.1 million BPD, on par with volumes previously seen in mid-1987), and a drop-off in accumulated oil stocks (July average: 530 million barrels) -- although still well above the five-year average maximum.

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From the 3 August 2020 issue of The Energy Bulletin:

Oil posted a small gain in July, boosted by a steadily weakening dollar and OPEC’s restraint. Deep output curbs by OPEC+ have helped futures rebound from their plunge below zero in April, yet the unprecedented cuts will ease this month. US crude inventories have shown signs of shrinking and are currently sitting at their lowest since April.

Futures have remained in a tight trading range with rallies limited by the pandemic holding back demand. ExxonMobil said it only sees an oil consumption recovery well into 2021.

US crude oil inventories moved sharply lower during the week ended July 24th as exports and refinery demand climbed to multi-month highs. Commercial oil stocks fell 10.61 million barrels, the biggest draw since 2019. While the draw pushed stockpiles to 14-week lows, they remained more than 17 percent above the five-year average for this time of year. The inventory draw was concentrated on the US Gulf Coast, where stocks fell 10.46 million barrels, and on the US West Coast, where stocks fell 1.7 million barrels. Meanwhile, stockpiles at the NYMEX delivery point of Cushing, Oklahoma, climbed 1.31 million barrels.

US oil companies have increased production by 1.2 million b/d over the past six weeks as they restored wells shut earlier this year and start producing from others they had left unfinished as prices sank. Output bottomed at 9.7 million b/d in the second week of June but has since risen to 10.9 million b/d as activity starts to pick up in Texas.

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Selected highlights from the 31 July 2020 issue of OilPrice.com’s Oil & Energy Insider include:

ExxonMobil posts huge $1.1 billion loss. ExxonMobil reported a loss of nearly $1.1 billion, the largest quarterly loss in 36 years. Production was down 7 percent, year-on-year. Exxon said it’s working on cost-cutting plans in a “last ditch” effort to preserve its dividend, and CEO Darren Woods said that the company would not take on more debt.

Chevron announces worst loss in three decades. Chevron reported an adjusted loss of $3 billion, along with an impairment of $5.6 billion. That included writing off Chevron’s entire unit in Venezuela, worth about $2.6 billion. “We would need to see sustained economic recovery and much lower inventory levels before we would add capital back to the Permian or other basins,” Pierre Breber, Chevron’s finance chief, told Reuters. “We’re in a lower for longer world where demand is down and there’s ample supply.”

Dakota Access dampens Bakken prospects. The potential loss of the Dakota Access pipeline could stall the North Dakota shale formation’s rebound. Moving oil by rail would add $3 to $6 in costs for producers. Anecdotally, some companies are holding off on drilling until they know more about the fate of Dakota Access, according to Reuters.

Saudi Arabia to unveil September prices amid market pressure. Saudi Arabia is under pressure to lower the price of its oil, according to Bloomberg. Traders expect a price cut for the first time since April. Saudi prices typically set the tone for the market, so the unveiling of prices for September in the next few days will offer clues into the market direction.

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.