July 2019 PETROLEUM WATCH CALIFORNIA ENERGY COMMISSION INSIDE PETROLEUM NEWS Crude Oil Prices (page 2) PRICES REFINING NEWS Crude Oil Production & Storage • Crude Oil Prices: On June 28, Brent • Shell Martinez: On June 13, the refinery (page 3) and West Texas Intermediate (WTI) shut down the flexicoker unit because crude prices closed at $67.52 and of mechanical issues. On June 17, the Gasoline and Diesel Retail Prices $58.20, respectively. The Brent crude refinery restarted the flexicoker unit. (page 4) price is $9.92 lower than one year Spot Markets Spreads ago, and the WTI price is $15.93 (page 6) lower than one year ago (page 2). Gross Margins • California Retail Gasoline Prices: On (page 10) June 24, the price was $3.61, a decrease of $0.27 since the end of May. Through June, the California price averaged $1.00 higher than the national average (page 4). • California Retail Diesel Prices: On June 24, the price was $3.97, a decrease of $0.13 since the end of May. Through June, the California price averaged $0.95 higher than the national average (page 5). Product of the Energy Assessments Division’s Supply Analysis Office. 1 CRUDE OIL PRICES Figure 1: Daily Crude Oil Prices $120 110 Brent West Texas Intermediate $110 CA Estimated Refinery Acquisition Cost 105 Trade Weighted U.S. Dollar Index $100 $90 100 $80 95 $70 (1973 100) = $60 90 $50 Dollars per Barrel (Nominal)Dollars per 85 Index Dollar U.S. Weighted Trade $40 $30 80 Jul-18 Jul-19 Apr-18 Oct-18 Apr-19 Jun-18 Jan-19 Jun-19 Mar-18 Mar-19 Feb-19 Nov-18 Dec-18 Aug-18 Sep-18 May-18 May-19 Source: U.S. Energy Information Administration (EIA), Oil Price Information Service (OPIS) and Federal Reserve Bank of St. Louis. CRUDE OIL PRICES Downward momentum from May continued WTI slightly outpaced Brent, shrinking the into June and crude prices remained monthly average Brent-WTI difference from June 2019 vs 2018 relatively low for most of the month. On $10.49 to $9.56. For context, the five-year (Percentage Change) June 20, spot prices rose after the EIA average is $3.96, the June 2018 average reported a drop in crude inventories, was $6.53, and is currently averaging Brent 14% lower an indication that summer demand has $8.70 for 2019. The difference could widen WTI 19% lower started to pick up. Despite the drop, U.S. given that the Organization of Petroleum CA-RAC 16% lower inventories are 12 percent higher than in Exporting Countries (OPEC) has agreed to 2018. Crude prices are still significantly extend their supply cuts through March June 2019 Averages lower than in 2018, suggesting that demand 2020.2 However, the high rate of production Brent $64.22 for crude is still below expectations. from the United States and large U.S. crude inventories could dampen the advantage WTI $54.66 Monthly averages for Brent, WTI, and OPEC hopes to gain from their supply curbs. CA-RAC $61.36 California Refinery Acquisition Cost (CA- RAC) were all 10 percent lower than the June 28, 2018 averages in May.1 Brent and CA-RAC Brent $67.52 ended the month at their respective peaks of $67.52 and $64.92 while WTI $58.20 WTI peaked at $59.18 on June 27. CA-RAC $64.92 1 CA-RAC is a weighted average of the prices of California (San Joaquin Valley) crude, Alaskan crude, and foreign crude. 2 “OPEC and allies extend oil supply cut in bid to boost prices,” Reuters, July 2, 2019 https://www.reuters.com/article/ 2 us-oil-opec/opec-and-allies-extend-oil-supply-cut-in-bid-to-boost-prices-idUSKCN1TX0TF. CRUDE OIL PRODUCTION & STORAGE Figure 2: U.S. Crude Oil Inventories Source: U.S. Energy Information Administration • U.S. crude oil production for June • U.S. crude oil inventory in June fell Reductions in crude stocks and higher averaged 12.20 million barrels by 14.8 million barrels to 468.5 refinery inputs are signs that demand per day (bpd). This amount is only million barrels. Current inventories could be picking up in the short run. 50,000 bpd lower than the May are 50.6 million barrels higher However, demand is weaker than in June average of 12.25 million bpd. This than June 2018 inventories. 2018 when inventories were lower and is a 1.30 million bpd increase • According to OPEC’s June Monthly inputs were higher. Crude production and from June 2018, when production Oil Market Report, total May OPEC imports are also lower than the rates averaged 10.90 million bpd. production decreased by 236,000 from the previous year. Average refinery • Crude oil imports for June remained bpd to 29.88 million bpd.3 Their utilization increased this month from at 7.3 million bpd. Compared world oil demand forecast for 2019 90 percent to 94 percent while crude 4 to June 2018 imports, this is a also decreased slightly from 99.94 imports remained relatively unchanged. decrease of 1.1 million bpd. million bpd to 99.86 million bpd. Crude imports fell by 1.1 million bpd over the year as U.S. production rose • U.S. crude oil refinery inputs had by 1.3 million bpd, which means a an increase of 499,000 bpd since portion of the demand for foreign May, finishing June at a four- crudes has shifted to domestic oils. week average of 17.2 million bpd. Refinery inputs are 430,000 bpd lower than a year ago. 3 OPEC June Monthly Oil Market Report, page iii, page 35: https://www.opec.org/opec_web/en/publications/338.htm. 3 4 U.S. EIA, Weekly Supply Estimates https://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm. GASOLINE AND DIESEL RETAIL PRICES Figure 3: Gasoline Retail Prices $4.60 California $4.40 U.S. West Coast (less California) $4.20 $4.00 $3.80 $3.60 $3.40 $3.20 $3.00 $2.80 $2.60 Dollars per Gallon (Nominal) Gallon per Dollars $2.40 $2.20 $2.00 Jul-18 Jul-19 Apr-18 Oct-18 Apr-19 Jun-18 Jan-19 Jun-19 Mar-18 Mar-19 Feb-19 Nov-18 Dec-18 Aug-18 Sep-18 May-18 May-19 Source: U.S. Energy Information Administration The average California gasoline retail price In June, the United States and West Coast GASOLINE PRICES in June was $3.72, $0.23 lower than in May (less California) average gasoline retail June 2019 vs 2018 when the price averaged $3.95. The June prices decreased from May to $2.72 and (Percentage Change) average was 3 percent higher compared to $3.22, respectively. From June 3, to July same month last year (sidebar). On June 1, the United States price decreased California 3% higher 3, the retail price was $3.83. The price $0.10 from $2.81 to $2.71. During the U.S. 6% lower decreased $0.08 the following week and same time, the West Coast (less California) West Coast 1% lower continued to decrease at $0.08 and $0.07 average price decreased $0.21 to $3.10. the weeks after to $3.61 on June 24. From The most noticeable change was the June 2019 Averages June 24 to July 1, the price increased 2.3 percent increase from June 24 to California $3.72 $0.01 from $3.61 to $3.62, because of the July 1, a $0.06 increase while the price gasoline excise tax rate increasing from across the U.S. was trending downward U.S. $2.72 $0.42 to $0.47 on July 1. For three months (Figure 3). The California retail price West Coast $3.22 straight, the California monthly average will likely increase during July because price has been at least $1.00 higher of the increase in the excise tax rate. Week of June 24, 2019 than the United States average price. California $3.61 U.S. $2.65 West Coast $3.12 4 GASOLINE AND DIESEL RETAIL PRICES Figure 4: Diesel Retail Prices $4.60 California $4.40 U.S. $4.20 West Coast (less California) $4.00 $3.80 $3.60 $3.40 $3.20 $3.00 $2.80 $2.60 Dollars per Gallon (Nominal) Gallon per Dollars $2.40 $2.20 $2.00 Jul-18 Jul-19 Apr-18 Oct-18 Apr-19 Jun-18 Jan-19 Jun-19 Mar-18 Mar-19 Feb-19 Nov-18 Dec-18 Aug-18 Sep-18 May-18 May-19 Source: U.S. Energy Information Administration DIESEL PRICES Diesel retail prices decreased across the California’s strong diesel inventories country in June (Figure 4). June 3 saw the helped lower retail prices. Weekly Fuels June 2019 vs 2018 highest prices of the month when California, Watch shows that diesel production (Percentage Change) the United States, and the West Coast (less started strong, but was in decline for California) hit $4.11, $3.14, and $3.32, the month.5 Despite reduced production, California 1% higher respectively. Prices then slid, with California diesel inventories built up above the five- U.S. 5% lower seeing the largest diesel price decrease. year band. This indicates a decrease in West Coast 6% lower California also saw the largest week-over- demand for diesel, which put downward week change, dropping $0.05 on June 10 pressure on the prices. The United States June 2019 Averages to $4.06. California retail prices dropped a and West Coast prices followed a similar California $4.04 total of $0.14 in June, ending June 24 at pattern but prices did not fall as much $3.97.