According to the latest inventory report from the United States Energy Information Administration (EIA), domestic demand for oil declined last week, driven by lower consumption of distillate fuel, while production declined. recovered from Hurricane Ida.
The EIA’s weekly State of Oil report, released on Wednesday, showed production climbed to 11.1 million bpd for the week ended September 24. This was up from 10.6 million b / d the week before and well above the week of Sept. 10 – 10.1 million b / d – when flooding and power outages caused by Hurricane Ida left widespread production problems in the Gulf of Mexico (GOM).
Before Ida, production had reached 11.5 million bpd. The storm hit GOM on August 29 and destroyed almost all of the region’s production until early September.
On the demand side, motor gasoline consumption soared last week, continuing a trend that, though occasionally interrupted, lasted most of the summer months. Distillate fuel oil, another source of recent strength in demand, however, fell 10%, resulting in an overall week / week demand drop of 4%.
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With production rising and demand falling, US commercial crude inventories, excluding strategic oil reserves, rose 4.6 million barrels from the previous week.
It marked a rare increase in 2021, as inventories declined alongside a broader recovery in demand which in most weeks eclipsed production. At 418.5 million barrels, oil inventories last week were about 7% below the five-year average.
In fact, demand over the past four weeks was up sharply from the previous year. Consumption during this period averaged 20.4 million barrels per day, up 14% from the same period a year earlier. Demand for gasoline averaged 9.2 million bpd, up 9%, while distillate fuel consumption averaged 4.0 million b / d, up 12%. Demand for jet fuel jumped 64% to 1.5 million bpd.
Global natural gas supply problems could add to the thirst for oil before winter. Gas supplies in Europe are precarious and demand is increasing in Asia, also raising concerns there, analysts at Rystad Energy noted.
This, analysts said, “dramatically broadened the economic incentive to switch from natural gas to oil in power generation.” They estimated that Asia alone could boost oil demand by 400,000 bpd over the next two quarters, putting upward pressure on prices.
International benchmark prices for Brent crude increased by approximately 50% in 2021.
“From a global oil balance sheet perspective,” said Rystad analyst Claudio Galimberti, “it would be a significant change and it supports the current rise in oil prices.”