Goff Heating Oil Market Price Information
Oil Market, Exchange Rate and Heating Oil Price Information March 2021.
Brent Crude Dated ($ per Barrel)
Price at Start of Month: $65.57 Price at End of Month: $63.58
Highest Price in Month: $69.36 Lowest Price in Month: $61.17
Pound £ to US Dollar Rate $ Exchange Rate FT:
Start of Month: 1.3938 End of Month: 1.3797
Kerosene (Heating Oil) Cargo Price $ per tonne
Start of Month: $539.00 End of Month: $521.75
Highest Price in Month: $568.50 Lowest Price in Month: $513.00
Resulting in a Heating Oil Price (Pence Per Litre) Monthly range: 3.36 ppl
Market Commentary on the Newsfeeds:
World oil prices rose over 7% in the first few days of the first week of March, as Opec countries agreed to not increase their oil output.
The OPEC+ decision to roll over current cuts till the end of March has come as a surprise to the oil markets as it is different from the group's plan announced last December which has sent oil prices above $60.
Crude prices rallied last week to end in the $65-$70 range. Concerns about the speed of recovery of the global economy seemed to be one of the major drivers for OPEC+ to keep production increases to a minimum. The Saudi Energy Minister already voiced his ongoing concerns about the global economy two weeks before the OPEC+ meeting, and he pointed out that producers need not be complacent under current prices.
Another factor to consider is the fact that almost 5 million bpd of OPEC production has been off the markets since May last year. Bringing any of these barrels back could have triggered prices to fall below $60, reducing cash flows for its members, and resulting in losing the opportunity to compensate for losses made during the pandemic.
One of the key pillars of support is the rollover of the Saudi million bpd surprise cut in April, and the exemption of Russia to raise production by 130,000 bpd which may have supported the group to reach a consensus.
Furthermore, OPEC+ is not expecting US shale to boost production as prices continue to rise, giving producers an opportunity to compensate for lost revenues while preserving their market share. For shale oil to come back we need (1) to have oil demand returning to pre-pandemic levels, and (2) a sustained level of current prices over an extended period of time. This will be essential to restoring confidence in investing into the shale industry while minimizing risks. Last week’s EIA report showed the US production at 10 million bpd, 3.1 million bpd below its level a year ago. Under the current production scenarios, prices are expected to trade above $70 in March supported by prospects of market over-tightening, the increasing rate of global vaccination, and the increasing likelihood of certain countries returning to pre-crisis normality. Fuel demand in the US is currently improving, especially gasoline and kerosene whose demand rose by 942,000 bpd and 305,000 bpd w/w, respectively, to stand at 8.15 million bpd and 1.29 million bpd, respectively.
US oil imports are also rising, while exports are almost unchanged, suggesting rising demand amid decreasing national production. The impact of the freeze is still observed on the refining side, as the crude input to refineries was last reported to be 9.9 million bpd, reflecting a drop of 5.7 million bpd below its normal level last year. Most of the rise in gasoline demand was met using gasoline stocks which declined by 13.6 million barrels w/w. These numbers should improve in the weeks ahead as refineries on the Gulf of Mexico restart their operations.
Last weekend, the US senate has approved a $1.9 trillion relief package which is expected to increase speculation-driven price inflation. It seems price levels and even forward curves do not seem sufficient to drive an OPEC decision on easing cuts, and perhaps as we see a greater opening of global economies, an uptick in flight movements, and advancing vaccination campaigns, then OPEC+ will likely be easing cuts to meet demand growth which may happen at some point in Q-2 2021.
Last week, the OPEC+ meeting saw some unexpected results, and it is very hard to predict the next move in April and beyond. Now we have two drivers, the OPEC+ cuts and equally important the Saudi voluntary cuts. Generally, we would expect suppliers to be willing to increase production as prices continue to grow, yet when OPEC suppliers will be convinced to do so remains highly uncertain.
Even if OPEC+ agrees on a production hike in April, Saudi Arabia will likely still not be in a hurry to ease Its voluntary cuts immediately. Statements from the Saudi Energy Minister did confirm that at the last press conference, suggesting that these cuts may continue throughout Q-2 2021, and that these barrels will be brought back in a phased manner. This suggests that prices will be supported by not only the OPEC+ cuts, but also by Saudi voluntary cuts during Q-2 2021. This week, Brent has briefly traded above $70, as a result of rising tensions in the Middle East, caused by Houthi attacks on Saudi Aramco's Ras Tanura facilities over the weekend. It seems then that the geopolitical risk premium in oil is back as oil markets are growing tighter once again.
By Yousef Alshammari for Oilprice.com 8th March 2021
While the unexpected rollover of the OPEC+ production cuts sent Brent Crude prices up to $70 a barrel, the highest oil prices in more than a year could dampen global oil demand recovery, which the OPEC+ group itself still sees as fragile.
After the surprise OPEC+ move last week, crude oil prices rallied faster and higher than many forecasters had predicted just a week ago as the market expects supply shortages amid recovering demand.
Oil at $70 a barrel is good for oil bulls, oil companies, and the oil-dependent budgets of most OPEC+ producers, but it is not good news for prices at the pump or oil-importing nations, including the key demand growth drivers China and India.
In addition, higher oil prices will put additional inflationary pressure on economies recovering from the pandemic slump, and raise the prices of many goods and services, including airplane tickets and imported goods in the United States, Dion Rabouin of Axios notes.
The immediate result of OPEC+ keeping production basically unchanged in April—with small exemptions for Russia and Kazakhstan totaling 150,000 bpd—will be higher gasoline prices everywhere, from the United States to India.
The upward pressure on gasoline prices had already begun even before the OPEC+ group surprised the market by rolling over production levels and Saudi Arabia keeping its extra 1-million-bpd cut into April. The alliance's delayed easing of the cuts, however, puts $3 a gallon national U.S. average price within sight.
Recovering fuel demand in the United States on the one hand, and the rallying crude oil prices, on the other hand, could push the national average to above $3 a gallon by Memorial Day, GasBuddy said after the OPEC+ meeting last week
The last time the U.S. national average hit $3 per gallon was in October 2014. Three years ago, in 2018, the national average came close to the $3 threshold, at $2.97 per gallon.
"Extending the production cuts maintains a growing imbalance between demand and supply, and puts more pressure on oil prices to rise, should global demand continue to recover. A continued recovery seems likely, led by American motorists filling their tanks at the fastest pace since the pandemic began. I predict the national average now has 70% odds of reaching $3 per gallon, a level not seen since 2014, primarily due to OPEC's opposition to raising oil production," said Patrick De Haan, head of petroleum analysis at GasBuddy.
According to Pay with GasBuddy data, U.S. gasoline demand increased on Friday by 4.9 percent week over week, to its highest level since the pandemic began. U.S. gasoline demand hasn't seen a daily week-on-week drop since February 20, De Haan tweeted on Saturday.
Consumers in India are also hit with high prices at the pump as the world's third-largest oil importer directly warned OPEC+ that its unexpected decision last week has the "potential to undermine consumption-led recovery and more so hurt consumers."
India and the world's top oil importer China—key global demand growth drivers—could slow down oil purchases at $70 a barrel in coming weeks and months, potentially underminingthe recovery in demand
"The risk is these higher prices will dampen the tentative global recovery. But the Saudi Energy Minister, Prince Abdulaziz, is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production," Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie, said, commenting on the OPEC+ rollover.
The high oil prices are also expected to put strong upward pressure on inflation which could accelerate beyond the Fed's targets and the targets of other monetary policy decision-makers around the world.
With the surprise OPEC+ move, OPEC's de facto leader and top global oil exporter Saudi Arabia is betting on overtightening the market to reap higher oil revenues in the short term, gambling on expectations that U.S. shale will look at higher profits instead of production this time, unlike in any of the previous oil price spikes in recent years.
"The kingdom might be pushing its luck if it pursues the hawkish path for too long," Vandana Hari, founder of Vanda Insights, told Bloomberg over the weekend.
The highest oil prices in more than 14 months could hurt global oil demand recovery, the very indicator that the Saudis want significantly improved before moving to ease the production cuts.
By Tsvetana Paraskova for Oilprice.com 8th March 2021
WTI slid 8.68% to $58.99 per barrel by 4:04pm ET, while Brent had slipped 8.01% to $62.55 per barrel. It is the biggest drop in absolute terms since April 2020, when oil slipped into negative territory.
Analysts have been volleying predictions during the recent price rally, with bulls signaling there is more room to run, making proclamations of a coming super-cycle. Others, more cautious in their outlooks, have warned for a couple of weeks that the optimism present in the oil markets were unjustified.
The recent rally was largely on the back of OPEC+ production cuts—or rather, the fact that they agreed to hold production steady in April, instead of ramping up production as the market had anticipated. The passing of the 3rd round of stimulus in the United States had also bolstered oil market sentiment.
But a rising dollar, increased crude inventories in the U.S., growing fears of a resurgence in coronavirus cases and vaccine safety concerns in Europe have proven worthy adversaries.
Those concerns are linked directly to oil demand resurgence. And markets are viewing this demand picture as less favourable today, as shown by crude futures which show the market backwardation is waning.
WTI’s front-month contract is once again trading at a discount to the following month.
Crude oil WTI April contract is now trading at $59.46 per barrel, while the May contract is trading at $59.57. WTI’s April contract is now down $5.14 on the day.
This is the fifth day in a row for oil price declines and the biggest drop in absolute terms since Apr 2020
By Julianne Geiger for Oilprice.com 18th March 21
The stone age didn’t end due to a lack of stones, and the oil age will end long before the “world runs out of oil”. This quote, often attributed to Saudi Oil Minister Shiekh Yamani, highlights a vital and frequently misunderstood fact about the oil industry. Oil supplies are not going to run out, but oil will eventually be replaced by cheaper, cleaner, and more efficient energy sources. This misunderstanding has led many analysts to predict the death of the oil industry. The Paris Agreement has set a global goal to control climate change and reduce the temperature of the earth. That goal will not be achievable until the world shifts from fossil fuels to clean and renewable energy. These ambitious targets are sure to accelerate the global energy transition away from fossil fuels, but it remains unclear just how long that transition will take.
On his very first day in office, President Biden cancelled the Keystone XL Pipeline. China has vowed to be carbon neutral by 2060 and recently launched the world’s largest carbon trading market. Meanwhile, both Japan and the European Union have promised to eliminate carbon emissions by 2050 and the EU aims to be carbon neutral by 2050. The Biden administration has promised to set aside $2 trillion for decarbonization and plans to re-join the Paris Agreement. All of these commitments are certainly impressive in theory, but in reality, they are going to run into two major problems. The first is achieving the adoption of renewable energy at an incredibly unrealistic speed, the second is ensuring that the system that we are transitioning to does what it needs to do. It is important to note that we do not currently have many of the technologies that we will need if we are to reduce carbon emissions by the levels set out in the Paris Climate Agreement.
In most energy transition plans, Carbon, Capture, and Storage (CCS) systems are one of the key technologies that will help curb CO2 emissions by capturing carbon from the environment and storing it in subsea facilities. However, as of 2020, only 26 facilities were working globally, capturing 40 million tons of carbon dioxide. Meanwhile, in 2019 the world emitted more than 35 billion tons of carbon. Closing that gap requires serious technological breakthroughs, which may be why Elon Musk is offering $100 million to the best carbon capture technology in his new competition.
Another challenge to this transition is the sheer size and influence of the oil and gas industry. The oil and gas industry has a gargantuan infrastructure, and an elaborate network of pipelines, wells, and other facilities. This is the infrastructure that our current energy grids are based upon. According to Czech-Canadian scientist and policy analyst Vaclav Smil, the U.S. would have to dedicate 25–50 percent of its landmass to solar, wind, and biofuels if it hopes to satiate U.S. energy consumption with renewables. Such a drastic change will come up against plenty of resistance from the oil and gas industry and will take significant time and investment.
The next big problem with the energy transition is the inherent limitations of renewable energy sources. One of these is power density i.e. amount of power per unit volume, denominated as Watt per square mile (W/m2). The power density of an energy system running on fossil fuels is “two to three orders of magnitude” above that of a wind or hydro-generation system according to Smil. Closely related to this concept is the element of spatial constraints. Renewable energy systems, due to their low power density, require vast swathes of land. An study by MIT predicts that 33,000 square kilometers of land would be required in order to power U.S. electricity demand with solar energy. Similarly, it would require using half of the UK landmass for wind turbines if the country were to use wind for all its energy needs.
While the ambitious pledges from various international bodies and governments would suggest the energy transition is near, the gap between theory and reality here is vast. Fossil fuels supplied 84% of global energy needs in 2020, which is a worrying number for those eager to reduce CO2 emissions. According to Climate Action Network., the EU will need to increase its use of renewables by 50 percent by 2030 and 100 percent by 2040 in order to adhere to the Paris Agreement’s climate goals.
Source: Our World In Data
But it isn’t all doom and gloom for energy transition proponents. The focus on Environmental, Social, and Governance (ESG) investing is influencing how private companies act. BlackRock, the largest asset manager on earth with over $7 trillion under management, has stressed that companies need to take climate change seriously. These moves in the private sector could significantly accelerate the energy transition.
While optimism has helped to galvanize support for a global energy transition, a degree of realism is necessary as well. It will likely be decades before a full global energy transition can take place, and in the meantime, the most effective way to reduce emissions would be to control consumption. This is a process that faces financial, technological, and social hurdles, and predicting how long it will take is a near-impossible task. The energy transition may have begun, but there is a very long way to go before fossil fuel dominance is truly challenged.
By Osama Rizvi for Oilprice.com
Additional Oil Market commentary & Market Data available from the BBC here: Market Data
The Office for National Statistics record the price of heating oil and publish monthly updates on the average delivered cost of a domestic delivery of 1000 litres of kerosene in the UK . The information held by the ONS is freely available online and can be found here: ONS Price of heating oil