Crude Oil Edges Higher
Oil prices rose slightly on Thursday, putting them on track for a significant weekly rise as China pushed to increase demand while global supply remained extremely tight.
US crude prices were 0.2% higher at $94.81 a barrel, while Brent futures were 0.4% higher at $101.67. Both contracts are on track for 5% weekly gains.
Gasoline RBOB futures in the United States were up 0.2% at $2.8032 per gallon.
The Chinese government said Thursday that it would increase its economic stimulus to 1 trillion yuan (about $151B).
This endeavor to rehabilitate an economy devastated by drought and COVID-19 limitations has been positively greeted by the oil market, considering that China is the world’s largest oil importer.
This news has boosted a market already boosted by the release of Energy Information Administration data showing that US crude inventories fell much more than expected last week.
Last week’s volume of oil and petroleum products shipped from the United States was the greatest in history dating back to February 1991. Furthermore, earlier this week, Saudi Energy Minister Prince Abdulaziz bin Salman hinted that the Organization of Petroleum Exporting Countries and its partners, known as OPEC+, could cut output, bolstering the market. Futures prices, which have plunged more than 25% from their summer highs, are failing to reflect the physical market’s tightness.
Investors are also looking for progress on reviving a nuclear deal with Iran, which may result in the OPEC producer restarting oil supplies to the global market.
Oil and Gas Companies Record Free Cash Flow
High energy prices can nearly triple oil companies’ free cash from operations this year to $1.3T, money that may be used to support a move to renewable fuels, pay down debt, or lavishly reward investors.
According to consultants Deloitte, the price trend should continue, and the global energy industry should create another $1.6T in surplus cash by 2030. That cash opens up many possibilities for an industry hampered by debt and losses since the COVID-19 outbreak.
Producers should earn $1T in surplus cash after investments, debt payments, and shareholder payouts within two years, making the next two years critical for strategic decisions. Disruptions in the oil and gas business over the last two years, including changes in consumer behavior and supply chain issues, combined with years of underinvestment and financial discipline, have helped drive oil prices to new highs and cash flows to new highs.
Oil Prices Firmed
Oil prices rose on the potential that the OPEC+ producer group will cut oil supplies. The more negative possibility of an agreement letting sanctioned Iranian oil exports back into the market still limited the gains. Falling oil and product stocks in the United States aided the price rise. Oil inventories fell by 3.2 million to 412.7 million barrels in the week ending Aug. 18.
The optimistic impact was offset by a smaller-than-expected decrease in gasoline stocks, signaling poor demand. Gasoline stockpiles in the United States declined by 27,100 barrels this week to 215.6 million barrels, falling short of estimates for a 1.6 million-barrel drop.
After some back and forth early in Wednesday’s trading session, natural gas futures settled in the positive as demand for gas for power generation remained strong. The September Nymex gas futures contract finished at $9.330/MMBtu, up 13.6 cents from Tuesday’s close, aided by persistent supply concerns in Europe, which have propelled record gas prices on the continent. The October contract gained 14.5 cents to $9.310.
The delayed resumption of Freeport is at least slightly favorable for domestic storage stockpiles. However, it adds to supply problems in Europe. Late last week, Russia’s Gazprom PJSC announced that it would shut down the Nord Stream 1 pipeline for three days for repair. The statement sent shockwaves through the gas supply system, sending European gas prices to new highs.
