The US Energy Information Administration (EIA) has determined that using real-time export data provides more accurate weekly petroleum statistics. The export data will now be provided by US Customs and Border Protection where previously it was estimated from monthly US Census Bureau reports which interjected an emphasis on market volatility.
The calculation of EIA's weekly US consumption of petroleum products uses the formula: Consumption (or product supplied) = Production + Imports – Stocks Change – Exports.
December 30, 2016 statistics indicate that most aspects of the petroleum market increased during the past year: crude oil, petroleum product and biofuels exports; consumption of gasoline, fuel oil, and propane; crude oil production and imports. MarketWatch reported that the only decrease in numbers was in domestic crude supplies falling more than expected: 7.4 million barrels (forecasted to be only 1.7 million barrels). Gasoline inventory rose 8.3 million barrels and distillate stockpiles increased 10.1 million barrels. Refinery usage held steady at about 90%.
The recent OPEC decision to cut back on production, which goes into effect this month (January 2017) has invigorated US crude oil exploration due to oil futures increases. That is, lower production by OPEC countries will lead to higher prices for oil globally. However, according to BloombergMarkets, this new drilling will also increase liquid natural gas (LNG) supplies since any oil extracted also creates associated natural gas production. This matters because many LNG contract's prices are linked to benchmark oil futures prices.
The expected increase in US gas inventories which this new activity in US exploration and extraction will lead to, will also set up a situation where gas prices actually fall, signaling an associated fall of LNG prices, which will cut into gas sales across the board.
In November, as reported in BloombergMarkets, in response to the OPEC decision announcement, Golar LNG Ltd, an owner of floating LNG terminals, saw its stock move up 16%, reportedly due to oil prices. Cheniere Energy Inc, an exporter of US shale gas by tanker, experienced a stock increase of 8.2%.
BloombergMarkets also sees an advantage for the US shale industry in the OPEC decision. Drillers in the Texas and and New Mexico Permian Basin fields could bring 150 drilling rigs into production quickly (within 6-9 months). Platts estimates that production there could move up from below 2 million barrels per day in 2016 to more than 2.226 million barrels per day in 2017. This could mean that hundreds of oil servicing firms which were severely hurt during the two-year oil industry downturn could come back to life. Note, though, that the OPEC deal only lasts for six months and will be renegotiated in May. This could certainly affect the drillers that ramp up in the near future.