U.S. oil inventories shrunk for a second consecutive week despite a demand drop amid a gradual recovery in economic activity and mixed coronavirus vaccine rollouts.
In its Weekly Petroleum Status Report (WPSR), the U.S. Energy Information Administration (EIA) said Wednesday crude inventories for the week ended April 2 — excluding those in the Strategic Petroleum Reserve — decreased by 3.5 million bbl from the previous week. At 498.3 million bbl, U.S. stocks held 2% above the five-year average.
U.S. crude production averaged 10.9 million b/d last week, down 200,000 b/d from the prior week and 2.2 million b/d below the 2020 peak reached in the March 13 week last year, just prior to the pandemic’s full impact in the Lower 48.
U.S. refinery utilization inched up to 84.0% last week from 83.9% the previous week, continuing a steady recovery from the interruptions imposed in February by Winter Storm Uri. Utilization had dropped to 56% in mid-February amid the deep freeze in Texas.
EIA said overall demand, however, fell 5% week/week and was 5% below the year-earlier level. Demand for travel fuels, long a drag during the pandemic, remained a principal culprit. Jet fuel consumption was down 13% year/year and gasoline demand was off 10%.
Analysts at ClearView Energy Partners LLC estimated that overall demand year-to-date is 6% below the comparable period in 2019.
While vaccination programs are increasingly prevalent across the country, the U.S. population is still far from herd immunity. In the meantime, virus outbreaks continue to disrupt activity in several heavily populated states, including Michigan and New York. Global virus challenges also continue to weigh on demand for U.S. exports, analysts say.
“For the oil market to recover, the world needs further progress in fighting the pandemic, a slowing infection count and a gradual withdrawal of lockdowns and restrictions,” said Rystad Energy analyst Louise Dickson. Demand is “understandably held back from robust growth until the needed pandemic breakthroughs are in place.”
In its April 2021 Short-Term Energy Outlook (STEO), released Tuesday, EIA estimated that global petroleum and liquid fuels demand would average 97.7 million b/d for 2021, up 5.5 million b/d from 2020 levels. The agency expects the bulk of the increase to come in the second half of the year, when it anticipates more widespread inoculation against the virus.
Global consumption totaled an estimated 96.0 million b/d in March, up 4.7 million b/d from a year earlier, EIA said in its STEO.
The Organization of the Petroleum Exporting Countries last week lowered its 2021 global oil demand outlook. Citing the pandemic’s persistence, it estimated an increase in consumption of 5.6 million b/d this year, down from 5.9 million b/d previously.
“Despite the continuous set of new hurdles,” Dickson said, “we still believe that overall, optimism for economic recovery will drive oil demand to finish 2021 strong.”
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