Crude oil demand is rebounding faster than supply, pushing prices higher, the Energy Information Administration said this week, noting that the price of West Texas Intermediate had reached its highest since 2014.
The agency noted the destruction of demand for crude last year, which brought U.S. inventories to levels much higher than the seasonal five-year average. This changed quickly, however, and now inventories of crude oil are below the five-year average for this time of the year.
“This year, demand for petroleum, both in the United States and globally, has largely returned to the pre-pandemic levels in 2019,” the EIA said. “Demand has grown faster than supply, reducing inventories and contributing to higher prices for crude oil and petroleum products.”
Production, meanwhile, has been much slower to increase. In 2019, the EIA said, crude oil output in the United States averaged 12.3 million bpd. By May 2020, it had fallen to 9.7 million bpd. Now, production is around 11.4 million bpd.
Still, the 11.4-million-bpd figure, the average for October, was a substantial increase on the September average, which stood at 10.7 million bpd, according to the Energy Information Administration. According to the agency, production will further rise to 11.6 million bpd next month and 11.9 million bpd next year.
Despite the output growth, however, the gap between supply and demand is what has been driving higher prices globally, helped substantially by OPEC+ and its policy to remain cautious with output increases. In the U.S., production growth has been spearheaded by small, private companies while the bigger public players have remained as cautious as OPEC+, prioritizing shareholder returns.
Most recently, prices got a boost from Washington’s decision to lift travel restrictions from visitors from abroad. Increased trans-Atlantic travel will boost demand for jet fuel, which has lagged behind other fuels because of such travel restrictions.
By Irina Slav for Oilprice.com
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