As imports rise, US crude inventories soar for second week

Domestic demand for oil increased last week, but strong crude production and imports ended up driving inventory gains in the United States for the second week in a row, the Energy Information Administration (EIA) said.

The EIA’s weekly state of oil report, released on Wednesday, showed production climbed to 11.3 million bpd for the week ending Oct. 1, from 11.1 million bpd. j the previous week. Oil imports, meanwhile, increased 39% week / week to 4.9 million bpd, with the market responding to steadily increasing demand in a context of a growing economy and rising prices. travel as the United States adjusts to the coronavirus pandemic.

As a result, US oil inventories, excluding those of the Strategic Oil Reserve, increased by 2.3 million barrels during the most recent reporting period. A week earlier, the shares had climbed 4.6 million barrels.

At 420.9 million barrels, however, inventories as of Oct. 1 were still 7% below the five-year average. This reflects a slow recovery in production following the sharp production cuts made in 2020 in response to demand destruction imposed by virus outbreaks. US production remains more than 1.0 million bpd below the 2020 peak reached last March before the pandemic.

At the same time, demand has rebounded this year and continues to hold well above 2020 levels.

Total products supplied – the EIA’s terminology for demand – have averaged 20.7 million bpd over the past four weeks, up 16% from the same period l last year. During this period, motor gasoline consumption averaged 9.2 million b / d, up 6%, while demand for distilled fuel averaged 4.1 million b / d. j, up 16%. Jet fuel consumption soared 64% to 1.5 million bpd.

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Analysts say the United States, through imports, is trying to increase its oil stocks to match supply with demand. Globally, meanwhile, producers are ramping up production in the second half of this year to meet growing international needs, including in densely populated countries such as China and India. But they are all catching up, analysts at Rystad Energy said.

Refiners “are purchasing large volumes of crude to meet growing demand for gasoline, supported by a return to normal pre-Covid 19 levels in Asia and Europe, and still on a strong upward trajectory in North America. North, “said Louise Dickson of Rystad on Wednesday. “This surge in demand has kept refinery utilization relatively robust and stretched above supply. “

The imbalance fueled a furious price rally. International benchmark Brent crude oil futures traded above $ 82 / bbl at points this week – the highest level since before the pandemic – while benchmark US West Texas Intermediate prices have approached the $ 80 level. Both contracts are up about 60% for the year.

Global natural gas supply issues that have driven futures soaring over the past month have increased demand for oil. The demand for gas is exploding in Asia as in Europe, where supplies are precarious. This is prompting sectors of the electricity sector to switch from gas to oil before winter, as natural gas futures have exploded abroad.

“… Never before have electricity prices risen so far, so quickly,” said analysts from the Societe Generale group led by Michael Haigh. “We are only a few days into the fall” and “the temperatures are still mild. A cold winter could cause serious problems.

With natural gas in a frenzy adding to the challenges of oil supply, and with U.S. production still relatively low, the world market is turning to the Organization of the Petroleum Exporting Countries (OPEC) and its allies, aka OPEC-plus.

Saudi Arabian Oil Co., aka Aramco, said this week that the potential natural gas crisis has already boosted oil demand by 500,000 bpd.

This is 100,000 bpd more than the pace of OPEC-plus increases currently underway. The cartel on Monday approved another production increase of 400,000 bpd for next month, continuing a plan launched in August.

However, Dickson said that unless more aggressive increases from the cartel, supply could follow demand until 2022.

“The supply response can only be described as delayed,” Dickson said, despite the “robust pricing environment”.

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