Oil Prices Settle as the Dust Clears Over Syria
Today, the Energy Information Administration released its weekly reports on the status of various liquid fuels in the United States, covering the week that ended September 20. The reports cover natural gas and petroleum, presenting data about the production, storage, and prices of the fuels. Changes in the data can reflect natural variations, seasonal trends, long-term market effects, and current events in regions of the globe where liquid fuels are produced, processed, and sold. This week was highlighted by easing the tension in Syria, where the U.S. once called for military action, upsetting the political climate in the Middle East.
Working natural gas in storage — the volume readily available to the market — increased by 87 billion cubic feet in the week ended September 20 to 3,386 Bcf, according to EIA estimates. This is down by 179 Bcf from the same period last year, but at the upper-end of the five-year historical range. Natural gas futures are still below the $4 to $6 range within which producers can both earn a profit remain and compete with alternative fuels such as coal.
The data show a trend has developed over the past few years. Inventories have been on the rise as domestic production increases, largely thanks to advances in horizontal drilling and hydraulic fracturing technology. These advances have contributed to a revolution in energy production in the U.S. and producers are rapidly helping make the dream of energy independence come true. Domestic production supplied the U.S. with 84 percent of its total energy needs in 2012, the highest level since 1991. The EIA estimates that the U.S. could become a net exporter of natural gas as early as 2020, assuming regulatory hurdles can be overcome.
U.S. crude oil refinery inputs averaged about 15.6 million barrels per day during the week ending September 20, 2013, with refineries operating at 90.3 percent capacity. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.6 million barrels from the previous week. At 358.3 million barrels, U.S. crude oil inventories are on the higher side of the average range for this time of year.
WTI, a grade of crude oil used as a benchmark in oil pricing, was $104.67 per barrel, $3.54 less than last week’s price but $12.80 more than a year ago. The price of crude oil ended the week in the middle of a downward trend as the dust has settled over tension in Syria. Concerns that the political climate in the Middle East might constrict the supply of oil had caused prices to stay artificially inflated during past weeks.
Also, some experts in the area are looking to an upcoming meeting between John Kerry and Iranian officials as a sign that economic sanction on Iran may be lowered, which could increase the supply in the market.
As the EIA put it, “All else equal, changes in gasoline prices follow changes in crude prices.” The average retail price of a gallon of gasoline in the U.S. is $3.434. This is down 6 cents from a week ago and 37 cents from the year-ago period, though up a fraction from the previous week. It is also down from the summer-to-date peak of $3.68, which was hit on July 22.
In August, the EIA projected that oil and gas prices would decline throughout 2014 — with regular gasoline approaching $3.00 per gallon by the end of the year. Thanks to increased production in the U.S. and other non-OPEC countries, prices could very well still continue to decline now that some of the dust has settled over Syria.