U.S. oil production last week held at a high point for the year as overall petroleum demand increased, led by consumption of travel fuels, the U.S. Energy Information Administration (EIA) reported Thursday.
Producers pumped 12.1 million b/d for the week ended July 1, according to the EIA’s Weekly Petroleum Status Report. That continued the pace of the prior week, when output first climbed above the 12.0 million b/d threshold in 2022.
Demand, meanwhile, rose more than 2% week/week, with solid increases in consumption of motor gasoline, jet fuel and distillates, including diesel fuel.
Analysts anticipate demand readings will again be strong with the next EIA report, which would capture travel over the July 4 holiday weekend.
That noted, petroleum consumption has been uneven week/week this summer following a run-up in global crude prices.
The crude price hikes are tied to an imbalance of supply/demand exacerbated by Western sanctions against Russia’s oil and gas complex because of that country’s invasion of Ukraine. This carried through to travel fuel costs that have, at least in certain weeks, given American consumers pause.
Total petroleum consumption over the last four-week period averaged 20.0 million b/d, down 4% from the same period last year, EIA reported.
Oil prices have been volatile in recent days, but West Texas Intermediate crude prices are still up about 35% in 2022. The U.S. benchmark hovered around $103/bbl in Thursday trading.
Rystad Energy said this week that its real-time road and aviation demand show a “stable” upward trend globally in July. Still, analyst Louise Dickson said moves by central banks in Europe and the United States to drive up interest rates to combat a surge in inflation have stoked recession fears that could suppress demand after summer travel winds down. Historically, when interest rates spike – they have more than doubled in the United States in 2022 – economies have slowed substantially.
“If a recession materializes and inflation continues to push prices for almost everything higher, oil demand is almost certain to fall,” Dickson said.
She added, however, the consumption trajectory is “challenging to read as the growth in demand after Covid-19 is mixed in with the impacts and market reaction of an expected economic downturn.”
OPEC-Plus Output, Leadership
Despite the uncertainty, OPEC and allied oil-rich nations that include Russia last week vowed to ramp up production this month and next. The group is targeting output growth of 648,000 b/d both months.
If the cartel could meet its goals, its average crude generation would climb to nearly 44 million b/d by August, in line with pre-pandemic levels.
OPEC-plus cited steady global demand for travel fuels this summer and China’s recent emergence from coronavirus-related lockdowns.
Separately, OPEC’s Secretary General Mohammad Barkindo died this week at the age of 63, the cartel said Wednesday.
Barkindo, an oil industry veteran who helped the group form OPEC-plus and guided it through the pandemic, was due to step down from the organization’s top job at the end of July.
The Nigerian had led OPEC for six years.
“This is indeed a very sad day for the OPEC family,” said Haitham Al-Ghais, the Kuwaiti oil official slated to become the next secretary general in August. “The legacy that Mohammad leaves behind him will be remembered in the history of OPEC for many years to come.”