August 2021 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil dipped by $4.79 (-6.6%), to $67.70 per barrel in August. That decrease occurred within the context of a marginally stronger U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of June’s increase of 443,000 barrels-per-day (BPD) in the amount of petroleum products demanded/supplied (to 20.5 million BPD, and a modest retreat in accumulated oil stocks (August average: 433 million barrels).

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From the 30 August 2021 issue of The Energy Bulletin:

Oil: Prices advanced as hurricane Ida shut off some 59% of Gulf of Mexico crude production. At the same time, the Federal Reserve reinforced its support to begin tapering stimulus by the end of the year. Futures in New York rose 2% on Friday to post the biggest weekly gain in more than a year. Federal Reserve Chair Powell said the central bank could begin reducing its monthly bond purchases this year, though it won’t be in a hurry to start raising interest rates after that. Some 49% of Gulf natural gas production was also shut ahead of the storm. The Gulf accounts for roughly 17% of the nation’s oil production, totaling about 1.7 million b/d, and 5% of its dry gas production.

New York futures settled $1.32 higher at $68.74, and London’s Brent climbed $1.63 to $72.70. NYMEX gasoline settled 1.88 cents at $2.27/gal, and September low sulfur diesel rose 2.60 cents to $2.11/gal. The price of crude could be headed for a jump of between 20 percent and 50 percent, judging from a bullish breakout pattern that suggests a significant rally could be coming.  The so-called “golden cross” appears on a chart when the short-term moving average of an asset crosses above its long-term moving average. The gold cross chart pattern points to a potential for a significant rally. “That’s only happened three times since the beginning of this century, and each of those three times has been followed by a further solid rally in crude oil, anywhere from 20%-50%.”

Crude inventories last week dropped for a third straight week while fuel demand rose to its highest since March 2020, the EIA said on Wednesday. Crude inventories fell by 3 million barrels in the week to Aug. 20th, slightly higher than analysts’ expectations. At 432.6 million barrels, crude stocks were at their lowest since January 2020. “A tick higher in refinery runs and a tick lower in imports has yielded a third consecutive draw to crude inventories – dropping them to their lowest since late January 2020.”

Shale Oil: Under normal circumstances, energy downturns have created perfect opportunities for oil and gas heavyweights to land prime assets on the cheap. A good case in point: the last oil bust of 2016 was followed by a sizable number of huge M&A deals in the sector, including the $60 billion tie-ups between Shell, BG Group, Canadian Oil Sands, and Suncor Energy, as well as a handful that fell through including the proposed merger between Halliburton and Baker Hughes. But Big Oil has now ditched that old playbook and appears largely disinterested in some M&A action this time around. As a result, the current year is shaping up as one of the slowest in the oil and gas industry.

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Selected highlights from the 31 August 2021 issue of OilPrice.com’s Intelligence Report include:

Hurricane Ida made the headlines this week, forcing the evacuation and shut-downs of offshore platforms in the Gulf of Mexico, shutting in some 1.7 million barrels per day (mbpd) of crude output and 2 mbpd of refining capacity. The prospect of smaller crude demand in the USGC, as Louisiana refiners will struggle to bring back full capacity anytime soon, has weighed on crude prices, setting them for a downward correction.

Simultaneously, the upcoming OPEC+ meeting on 01 September has left market watchers guessing as to how the oil-producing club will react to the US' call to produce more. We assume that the initial production target allocation, agreed last month, will remain unchanged.

Hurricane Ida Shuts 2 Mbpd of US Refining Capacity. With most of New Orleans and Louisiana assessing the damage brought about by the hurricane, some 2 mbpd of refining capacity remains still offline in the US Gulf Coast, including ExxonMobil's 500 kbpd Baton Rouge Refinery and Marathon's 565 kbpd Garyville Refinery.

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.