U.S. crude production ticked up last week, approaching a 2022 high, keeping pace with an increase in demand for travel fuels, the U.S. Energy Information Administration (EIA) said Wednesday.

Oil Production

Production for the week ended Aug. 26 rose by 100,000 b/d to 12.1 million b/d from the prior week, EIA said in its Weekly Petroleum Status Report. That brought output close to the pandemic-era high of 12.2 million b/d reached earlier in the summer.

After a choppy mid-summer run on the demand front amid lofty gasoline prices, consumption is stabilizing in late August and may rise into the early fall, analysts at Evercore ISI said Wednesday. Prices at the pump have fallen substantially from record highs earlier this summer – down more than 20% from June 14 to around $3.40/gallon on Wednesday.

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At the same time, high natural gas prices amid robust global demand could lead to increased gas-to-oil switching this fall.

Natural gas futures traded near 14-year highs through most of August, approaching $10/MMBtu at points. European and Asia prices soared dramatically higher. West Texas Intermediate crude prices, meanwhile, hovered around $90/bbl Wednesday. That was down more than 25% from the 2022 peak reached in March.

“Gas-to-oil switching should provide further demand pull,” the Evercore team said.

If that proves the case, U.S. crude production could continue to creep upward. Output still remains roughly 1 million b/d below pre-coronavirus peak early in early 2020. OPEC projections for global demand put worldwide consumption ahead of supplies, barring continued increases in production.

The cartel and allies collectively known as OPEC-plus recently agreed to increase output by 100,000 b/d in September. That would bring the OPEC-plus total production target back to pre-pandemic levels after a long recovery from the depths of the pandemic in 2020.

However, as Rystad Energy analyst Daria Melnik has noted, several OPEC-plus members have struggled this year to ramp up production and meet targets because of aging infrastructure and political turmoil. This includes Russia, which finds itself wading through a sea of Western sanctions against its energy complex in protest of the Kremlin’s invasion of Ukraine.

The United States banned imports of Russian oil and gas, and the European Union followed with a planned embargo on Russian crude. European countries also are calling for U.S. exports of liquefied natural gas to help wean themselves off Russian natural gas.

The global oil market remains “structurally short and supply constrained, something that will take time to resolve. The one bright spot for global supply is the U.S., where industry activity should begin to show results,” the Evercore analysts said.

On the domestic demand side of the equation, meanwhile, total petroleum production for the latest EIA period rose 4% week/week to 20 million b/d, boosted by increases in gasoline and jet fuel ahead of the long Labor Day weekend ahead.

Total products supplied over the last four-week period also averaged 20.0 million b/d.

With demand holding at that level, U.S. commercial crude inventories, excluding those in the Strategic Petroleum Reserve, decreased by 3.3 million bbl last week. At 418.3 million bbl, oil inventories are about 6% below the five-year average, according to EIA.