Ukraine war ups ANS

US crude inventory build offset by Russia/Ukraine war missile premium

Steve Sutherlin

Petroleum News

Alaska North Slope crude fell 47 cents Nov. 20 to close at $71.93 per barrel, as West Texas Intermediate fell 52 cents to close at $68.87 and Brent fell 50 cents to close at $72.81.

Oil futures rose in morning trading Nov. 20 but reversed after a reported surprise build in U.S. commercial crude inventories and gasoline supplies.

At the end of the five-day trading period ending Nov. 20, ANS held a 73-cent gain from its close of $71.20 Nov. 13 to close at $71.93 Nov. 20.

Losses Nov. 20 were held in check by a war premium, over concerns that the Russia/Ukraine war might escalate after reports emerged Nov. 18 that President Biden gave Ukraine the green light to use advanced U.S. long-range missiles to strike targets inside of Russia. Worries that a WWIII situation was imminent were soothed by reports that Vladimir Putin is open to discuss a Ukraine ceasefire with Donald Trump, but Putin nixed major territorial concessions and called for Ukraine to abandon notions of joining NATO, five sources with knowledge of Kremlin thinking told Reuters Nov. 20.

Despite the report that the Kremlin is open to work on a cease-fire deal, "there remains a great deal of uncertainty surrounding the near-term outlook for the conflict," Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

In a bullish demand development, Terence Hove of Exness told the Wall Street Journal that a rebound in China's oil demand is likely, which could propel crude imports to near-record levels by the end of November.

U.S. commercial crude inventories for the week ended Nov. 15 rose 0.5 million barrels from the previous week to 430.3 million barrels, 4% below the five-year average for the time of year, the U.S. Energy information Administration reported Nov. 20.

On average, analysts polled in a survey conducted by S&P Global Commodity Insights called for a decline of 800,000 barrels in U.S. commercial crude for the week.

Total motor gasoline inventories jumped 2.1 million barrels for the period to 208.9 million barrels, 4% below the five-year average for the time of year, the EIA said. Distillate fuel inventories fell 0.1 million barrels to 114.3 million barrels, 4% below the five-year average for the time of year.

The S&P Global Commodity Insights survey called for supply decreases of 2.5 million barrels for gasoline and 1.8 million barrels for distillates.

Oil inched higher Nov. 19 as ANS added 28 cents to close at $72.41, WTI added 23 cents to close at $69.39 and Brent gained a penny to close at $73.31.

Prices were boosted as Russian crude shipments hit a two-month low based on reduced loadings from Russia's Western ports, according to tanker-tracking data monitored by Bloomberg and released Nov. 19. Russian maritime crude oil exports fell to 3.28 million barrels per day in the month ending Nov. 17, off 150,000 bpd versus the preceding four-week average ending Nov. 10.

Daily Russian crude shipments in the week ending Nov. 17 slid some 740,000 barrels to 2.83 million, the lowest since the first week of July.

Also on Nov. 19, Ukraine launched at least six U.S.-made ATACMS missiles on a weapons depot in Russia's Bryansk region, the Russian Defense Ministry and Ukrainian officials said per a Washington Post report.

Crude prices surged Nov. 18 on reports of a production halt at Norway's Johan Sverdrup field caused by an onshore power outage. ANS leapt $2.10 to close at $72.13, WTI leapt $2.14 to close at $69.16 and Brent leapt $2.26 to close at $73.30.

The leap was preceded by a down day Nov. 15 which saw ANS drop $1.55 to close at $70.04, while WTI sunk $1.68 to close at $67.02 and Brent dropped $1.52 to close at $71.04.

ANS rose 39 cents Nov. 14 to close at $71.59, WTI rose 27 cents to close at $68.70 and Brent rose 28 cents to close at $72.56.

Majors invest in biofuels

The six companies have announced 43 biofuel projects either already operational or targeted to start up by 2030, Rystad Energy said in a Nov. 19 release.

Investments include biodiesel and ethanol, but the focus is clearly on hydrotreated vegetable oil and sustainable aviation fuel -- expected to make up some 90% of the projected biofuel production.

The investments could add a combined 286,000 barrels per day of production capacity, Rystad said, adding that 31 projects are greenfield developments, six involve co-processing -- integrating bio feedstock into existing crude-oil refineries to produce a blended feedstock -- while another six are full conversions of refineries to facilities dedicated exclusively to biofuel production.

"Co-processing stands out as a cost-effective option that allows companies to leverage existing infrastructure and reduce upfront investment, making it an appealing choice for oil majors entering the biofuels market," Rystad said.

"Supermajors are accelerating investments in biofuels like HVO and SAF, recognizing their potential as low carbon 'drop-in' fuels that can be swiftly integrated into existing aviation, heavy transport and marine fuel systems," said Lars Klesse, Rystad bioenergy research analyst. "As the energy transition progresses, these biofuels offer a practical, near-term solution to reduce emissions without requiring significant changes to current infrastructure."