Demand for U.S. petroleum products has increased while production only rose last week, the Energy Information Administration (EIA) said. The result: a significant drop in national oil inventories that left inventories well below historical averages.
Certainly, the fallout from Hurricane Ida and the continued impacts of the Delta coronavirus variant are adding wrinkles for weeks to come. The Organization of the Petroleum Exporting Countries (OPEC) plans to increase production could also change the landscape. But until August, strong domestic demand for crude oil products and its impact on supplies punctuated the history of US oil.
Demand has intensified over the summer months amid coronavirus vaccine deployments and as Americans adjust to the pandemic despite the Delta mutation. Aggregate oil demand for the week ended August 27 increased 5% from the previous week, driven by increased consumption of jet fuel and distilled oil as well as continued demand for motor gasoline, showed the EIA’s Weekly State of Oil Report (WSPR).
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Aggregate demand of 22.8 million bpd for last week peaked in 2021. Notably, demand was 6% ahead of the comparable week of 2019, before the virus outbreaks.
Total products supplied – the EIA terminology for demand – have averaged 21.4 million bpd over the past four weeks, up 17% from the same period in 2020. In the past four weeks, the demand for motor gasoline has averaged 9.5 million bpd, up 7%, while distillate fuel consumption has averaged 4, 1 million bpd, up 10%. The jet fuel product supplied increased 52% to 1.5 million bpd.
Production increased to 11.5 million b / d from 11.4 million b / d in the previous period. Production was around 1.6 million bpd below the 2020 peak reached last March before the impact of the pandemic.
US commercial oil inventories last week – excluding those in the Strategic Petroleum Reserve – fell 7.2 million barrels from the previous week. At 425.4 million barrels, crude inventories are 6% below the five-year average.
Analysts at ClearView Energy Partners LLC said demand shows little sign of declining, although last week’s robust levels are unlikely to be sustainable into the fall. They said last week’s consumption was likely due “in part to the storage of fuels throughout the supply chain before Hurricane Ida”, and the next WPSR is expected to show the storm’s impact on ” oil production, refinery use, imports / exports and demand. “
Separately, OPEC and its allies, aka OPEC-plus, agreed on Wednesday to continue their plan to increase production until September 2022.
Following earlier increases, the cartel agreed last month to increase production by an additional 400,000 bpd per month until it rolls back all cuts made amid the pandemic in 2020. The cartel cut production by 9.7 million bpd last year. Almost 6 million bpd remains offline.
OPEC said in a statement Wednesday following a meeting of ministers from member countries that, as the effects of the pandemic “continue to create some uncertainty, market fundamentals have strengthened” and stocks have strengthened. Oil prices “continue to decline as the recovery gathers pace.”
OPEC noted strong demand in the United States as well as in China and parts of Europe. He predicted in August that demand for oil would increase by 5.95 million bpd this year, or nearly 7%, and rise another 3.3 million bpd next year.
OPEC data shows that unless there is a substantial change in demand or an increase in US production, the global market will be in deficit until the end of 2021.
âI think it would hurt the credibility of OPEC-plus to change the terms after just one month,â said Robert Yawger, director of energy futures for Mizuho Securities USA LLC.
But he noted that the cartel’s production plan is far from being cemented.
Indeed, if the demand for transportation fuel were to decline during the winter, as is often the case, the global oil market could quickly run into surplus next year by an average of 2.5 million barrels per day, OPEC researchers said, leaving the potential for OPEC open. -more adjustments in the coming months.
Rystad Energy’s Bjornar Tonhaugen, head of oil markets, questioned whether OPEC-plus was already too optimistic about demand, “given the risk of further blockages to tackle the unresolved spread of Covid mutants.”