US crude production stagnates amid global supply concerns; OPEC-Plus on deck


U.S. oil producers were active by 2022 standards last week. However, total production remained flat for the third consecutive period and remained well below pre-pandemic levels, the US Energy Information Agency (EIA) said on Wednesday.

Production for the week ending April 29 totaled 11.9 million bpd, according to the EIA. This corresponded to the high rating for this year and corresponded to the two previous EIA reporting periods. It was also significantly above the 11.6 million bpd level at which production held for most of the first quarter, the agency’s latest weekly State of Oil report showed.

However, exploration and production (E&P) companies are moving cautiously amid pressure from investors to preserve cash and shift more resources to renewable energy projects. Recent demand declines are also prompting US E&Ps to be cautious, despite global supply concerns caused by Russia’s invasion of Ukraine.

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Total consumption of petroleum products fell last week, a time when blizzards wreaked havoc on the northern plains and the Rocky Mountains. In addition, tornadoes rocked the central and southern parts of the country, which impacted the demand for travel fuels.

Consumption fell by 2% week/week to 19.5 million b/d.

Restless demand

Demand has been unstable this year after already high fuel prices were further shaken by the war in Ukraine. Total product supplied over the past four weeks averaged 19.3 million bpd, down 3% from the same period last year, the EIA said.

Following bouts of weaker demand, commercial inventories of U.S. crude oil, excluding those in the Strategic Petroleum Reserve, rose 1.3 million barrels from the previous week. However, after a solid rebound in consumption last year, to 415.7 million barrels, inventories are 15% below the five-year average.

International supplies are also vulnerable.

The United States banned imports of Russian oil and gas in opposition to the Ukrainian conflict. Along with several rounds of Western economic sanctions that have hurt the Kremlin-controlled energy complex, Russia’s crude exports have fallen by around 1 billion barrels a day.

The European Union (EU), rushing to sever ties with the Kremlin following its invasion of Ukraine, on Wednesday proposed an embargo on Russian crude within six months. If all 27 EU members vote yes, it could further shake up global oil supplies.

Before the war, according to EIA data, the EU imported between 3.0 million bpd and 3.5 million bpd from Russia.

According to media reports, EU officials in Brussels, where bloc members were meeting, said they hoped for a decision on the potential ban this week.

Price Rally

Additional supply threats fueled a rise in global oil prices, with West Texas Intermediate and Brent crude prices both climbing on Wednesday. Both were already well above $100/bbl.

“While most commodity markets were already experiencing tight supplies, the war in Ukraine triggered a strong rally on top of already high prices, and rightly so,” said Societe Generale Group analyst Michael Haigh.

However, global demand has fallen this spring in response to high prices and amid widespread lockdowns in China to fight new coronavirus outbreaks. The war has also created uncertainty in Europe, noted researchers from the International Energy Agency (IEA).

In April, the IEA said it forecast average demand of 99.4 million bpd in 2022. This would mark an increase of 1.9 million bpd from 2021, but the latest estimate was down 260,000 bpd from an earlier forecast.

In April, OPEC researchers also revised their global oil demand forecast, lowering it by around 500,000 bpd. They cited both the pandemic and weaker economic growth in Asia. Still, the cartel said consumption this year would increase by 3.7 million bpd to 100.5 million bpd.

The cartel and its allies, known as OPEC-plus, were due to meet on Thursday to decide whether to further increase production.

OPEC-plus previously agreed to increase production by around 400,000 bpd through May. This has been the policy since last August, although it represents a measured unwinding of the nearly 10 million b/d of cuts made in 2020 in response to the initial demand destruction imposed by the pandemic.

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