Demand for crude oil returns faster than supply, raising prices and reducing inventories – Today in Energy

November 9, 2021

Source: US Energy Information Administration and Bloomberg

The price of U.S. benchmark West Texas Intermediate (WTI) crude oil is near its highest level since 2014, rising rapidly from the lows of mid-2020. Due to the economic effects, government and business responses, and personal travel changes caused by the COVID-19 pandemic in 2020, the demand for crude oil and petroleum products has declined rapidly, inventories have increased, and prices have increased. have falled.

Declining demand in the first half of 2020 resulted in increased crude oil inventory levels. Crude oil inventories in the United States stood at 440.3 million barrels at the end of January 2020 and rose to 532.7 million barrels at the end of June 2020. Crude oil inventories in the United States, however, have returned to levels pre-pandemic, falling to 438.9 million barrels in July 2021, which is below January 2020 inventory levels. Crude oil inventories hit a recent low of 413.9 million barrels during the past year. week of September 17, but they increased to 434.1 million barrels during the week of October 29.

This year, demand for oil, in the United States and around the world, has largely returned to pre-pandemic levels in 2019. Demand has grown faster than supply, reducing inventories and contributing to rising prices. price of crude oil and petroleum products. The price of WTI hit $ 84 per barrel (b) on November 1, up $ 37 / bbl since the start of the year. Likewise, the price of Europe’s benchmark crude oil, Brent, rose $ 34 / bbl over the same period, reaching $ 85 / bbl on November 1.

Refineries use crude oil as a raw material to produce petroleum products. Refineries have increased their operations (increasing their demand for crude oil) at a faster rate than US crude oil production has increased this year, contributing to lower crude oil inventories in the United States. Crude oil inflows to the United States are almost back to 2019 levels for this time of year, despite several refinery closures since 2020.

weekly U.S. crude oil production and refinery inputs

In contrast, US crude oil production returned more slowly. In 2019, U.S. crude oil production averaged 12.3 million barrels per day (b / d). US crude oil production then fell to 9.7 million bpd in May 2020. From October 1 to October 29, 2021, weekly data indicates that US crude oil production averaged 11.4 million bpd. b / d.

Main contributor: French matthew

Steve R. Hansen