Falling US oil inventories push oil prices higher

Despite an increase in crude oil inventories in the latest EIA report, U.S. commercial oil inventories have declined most weeks over the past year and a half, falling below five-year seasonal averages and even below the five-year average before the pandemic. The continued decline in U.S. oil inventories over the past year suggests that supply has not caught up with the rebound in demand as U.S. exploration and production companies have failed to respond with higher oil prices. new drilling activity to rising crude oil prices.

Oil inventories below seasonal norms have contributed to the market tightening, alongside the OPEC+ group’s inability to fully meet its rising monthly production quotas and rising global demand as economies seek to return to normal. normal.

So far, global oil demand has resisted the Omicron wave, prompting the International Energy Agency (IEA) to revise upwards its estimate of demand growth for 2022. 200,000 barrels per day (bpd) last week.

In the United States, the latest EIA data as of January 14 show a small crude inventory build of 500,000 barrels and another strong increase in gasoline inventories, which added 5.9 million barrels. This follows a combined increase in gasoline inventories of more than 18 million barrels in the previous two weeks.

Despite the increase, U.S. gasoline inventories are now in line with the 2015-2019 five-year average, before the pandemic, according to Reuters market analyst estimates John Kemp.

Compared to the last five-year average, which includes pandemic years, gasoline inventories are now about 2% lower than the five-year average for this time of year, according to EIA data. show.

The data also highlighted the fact that total U.S. commercial oil inventories fell by 1.5 million barrels in the week ending Jan. 14. Crude oil inventories in the United States are about 8% below the five-year average for this time of year. Distillate inventories are about 16% below the five-year average, and propane/propylene inventories are about 7% below the five-year average, according to the EIA. This includes pandemic years.

Compared to the 2015-2019 average, total commercial stocks in the United States are 4% lower than the five-year pre-pandemic seasonal average – the lowest level for this time of year since 2015, a estimated Kemp of Reuters.

In December 2021, for example, U.S. oil demand fell to 21.1 million bpd with more people driving places instead of flying, the American Petroleum Institute’s chief economist said, Dean Foreman, in the latest API report. Monthly statistical report.

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“In contrast, U.S. crude oil and natural gas liquids (NGL) production remained broadly stable, with minimal investment and drilling response even as oil prices returned to above $80 a barrel in January,” Foreman wrote.

“The decline in domestic oil production has also forced refiners to use oil already produced and has consequently reduced US crude oil inventories below their five-year range,” he added.

At the end of December, crude oil inventories were below the five-year range and their lowest since December 2014, according to the API report. show. In addition, total inventories were at their lowest in December since 2017.

Lower than normal oil inventories put upward pressure on U.S. and international oil prices, which rose to their highest level since October 2014 last week.

The tightness of the market these days is reflected in the increasing demotion in the futures prices of the two main benchmarks, WTI and Brent, with higher and rising fast prices compared to those further back in time.

Robust demand, insufficient investment in new supply, low inventories and dwindling global spare production capacity prompted major Wall Street banks – including Goldman Sachs, JP Morgan and Morgan Stanley – to predict that oil prices could reach 100 dollars a barrel as early as this year.

By Tsvetana Paraskova for Oilprice.com

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