US crude inventories are falling again; IEA says global oil demand in 2021 will exceed production

National oil inventories fell for the second week in a row, falling 400,000 barrels in the period ending May 7 and keeping inventories below the five-year average, the Energy Information Administration (EIA) said on Wednesday. the United States.

Inventories plunged 8.0 million barrels – excluding those in the Strategic Petroleum Reserve – a week earlier as year-on-year demand increased alongside declining coronavirus cases, with economic activity increased consumption and increased consumption of travel fuels over the past month.

At 484.7 million barrels, U.S. crude oil inventories were about 2% below the five-year average at the end of last week, the EIA said in its Weekly State of Oil Report (WPSR).

The recent inventory drawdowns likely reflect the build-up in demand over the past few weeks, with consumption actually declining last week. Aggregate demand for the May 7 period fell 11% week / week.

Over the past four weeks, however, total demand has averaged 19.1 million bpd, up 23% from the same period last year, with gasoline consumption at engine averaging 8.9 million bpd, up 41%.

Refineries operated at 86% of operational capacity last week, the same level as before the pandemic.

“Working storage fell to 57.6% of its capacity, by our estimate – 2 percentage points below” from the comparable week of 2019, before the pandemic, analysts at ClearView Energy Partners LLC said.

Inventory withdrawals could have been larger if domestic production and imports had not increased last week.

US crude production for the past week increased 100,000 b / d week / week to 11.0 million b / d, according to the WSPR. Production was about 2 million barrels per day below the 2020 peak, reached in early March before the coronavirus outbreaks, and 600,000 barrels below levels a year earlier.

Oil imports averaged 5.5 million bpd last week, up 37,000 bpd from the previous week. Over the past four weeks, imports have averaged 5.7 million barrels per day, 7.6% more than a year earlier.

Additionally, after jumping 62% to 4.1 million bpd in the last week of April – the highest level since before the pandemic – U.S. crude exports fell to 1.8 million b / d last week.

IEA sees strong demand

Separately, the International Energy Agency (IEA) announced on Wednesday that it forecast global oil demand to increase by 5.4 million b / d in 2021. It was 270.00 b / d of less than a previous forecast last month due in large part to a large increase. in cases of viruses across heavily populated India.

But the IEA said in its monthly Oil Market Report he anticipates an explosion in demand in the second half of 2021 “because of the expectations that vaccination campaigns continue to develop and the pandemic is largely under control”.

The Paris-based agency said the global oil supply, meanwhile, increased by 330,000 bpd to 93.4 million bpd in April and is likely to rise further in May as the organization of the Petroleum Exporting Countries (OPEC) and its allies begin to ramp up production this month. The OPEC-led change is part of a three-month effort to ramp up production ahead of expected demand jumps this summer and into the fall.

“For the whole of 2021, global oil production is increasing by 1.4 million barrels per day per year” after “a collapse of 6.6 million barrels per day in 2020,” the IEA said.

Despite the increase, the agency said, supplies “are unlikely to increase quickly enough to keep pace with the expected recovery in demand.” As vaccination rates rise and mobility restrictions ease, global demand for oil is expected to soar “from 93.1 million b / d in 1Q2021 to 99.6 million b / d by the end of the year.

Brent crude oil prices surged in intraday trading after the release of the IEA report. “The positive sentiment in the demand outlook adds to the upside risk to prices,” said Louise Dickson, analyst at Rystad Energy, noting that OPEC had released a forecast for oil demand a day earlier. stronger in 2021, driven by expectations of increased economic activity. The cartel noted that coronavirus vaccination campaigns are gaining momentum in North America, Europe and parts of Asia. For 2021, global oil demand is expected to increase by nearly 6.0 million b / d from last year, or 7%, to an average of 96.5 million b / d, the OPEC in its report. Monthly Oil Market Report. This was unchanged from the estimate of the previous month.

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Felix J. Dixon