U.S. crude oil climbs 3.2% to $52.45/bbl after EIA data showed that refiners processed a record amount of crude and that supplies fell at the Cushing, Okla., storage hub.
U.S. refiners churned 17.1M bbl/day of crude into fuel last week, the highest weekly figure going back to 1982, while Cushing stockpiles, which have been rising in recent weeks, fell by 579K barrels.
Prices recovered after initially falling in reaction to a higher than expected rise in total crude oil inventories to 4.1M barrels, and U.S. production jumped to more than 8.9M bbl/day during the week, the highest read since April.
But analysts say the stockpile gains largely were driven by an increase in oil imports, which rose to their highest level since 2012 as shipments of crude that were delayed at the end of last year for tax purposes are starting to appear.
"OPEC production adjustment alone wouldn't be enough to clear the total overhang” of 300M barrels currently in storage, says the cartel in its first monthly report since agreeing to (OPEC) production cuts.
At issue is a subsequent agreement with non-cartel producers (namely Russia) for them to reduce output alongside OPEC.
History has shown it's not too easy to enforce production limits even within OPEC, leading some to question whether any non-OPEC deal has any chance of succeeding.
OPEC producers boosted production by about 150K barrels per day in November, including Saudi Arabia, which pumped out an additional 95K bpd.
Oil this morning is lower by 1.4% to $52.23 per barrel.
Electric vehicles are forecast to cut into oil demand by 1M-2M bbl/day by 2035, according to oil industry consultant Wood McKenzie.
That estimate is actually much more conservative than Bloomberg New Energy Finance’s estimate for EVs to impact demand by 8M bbl/day by 2035. For perspective, OPEC agreed this week to coordinated production cuts of 1.2M bbl/day which swung crude oil prices wildly. EVs are only sipping up the equivalent of 50K bbl/day currently.
The general consensus even in the oil industry is that governments are moving toward major changes with pollution and emissions regulations. Just this week, the cities of Paris, Mexico City, Madrid and Athens all said they would ban the use of diesel vehicles by 2025. Beijing is also slowly adopting pro-EV policies.
A higher mix of EVs in the future has already been tipped off by the dramatic long-term electrification initiatives announced this year by companies such as BMW (OTCPK:BMWYY), Volkswagen (OTCPK:VLKAY), Ford (NYSE:F) and Toyota (NYSE:TM). Around the corner, Tesla Motors (NASDAQ:TSLA) and General Motors (NYSE:GM) have their mass model EVs ready to roll - while new EV trucks, buses and motorcycles are also on the way.
WTI crude oil futures +1.21% to $51.68/bbl on Friday. Brent crude +0.96% to $54.46/bbl.
Oil and the stocks of European oil players were hit early today, with a weekend story about Saudi Arabian oil honchos pulling out of a Monday meeting with their Russian counterparts setting the opening tone.
Later in the session though, Iraqi Oil Minister Jabbar al-Luaibi said he was optimistic a production deal will be reached later this week.
WTI crude is now higher by 2.55% on the session to $47.24 per barrel. USO +1.95%
The latest chatter on some sort of agreement comes from Libyan OPEC Governor Mohamed Oun, who says the cartel is discussing an output range of 32.5M-33M barrels per day (vs. current levels just north of 35M).
OPEC meets to maybe hammer out a formal deal later this month.
WTI crude today is higher by 3.9% to $47.48 per barrel - now up about $4 per barrel over the past few sessions.