The OPEC+ production cuts are starting to show the desired effects as global oil inventories start to fall, and oil clocked its best quarter in 30 years. While the supply tightness first was felt in Europe, it may now be soon felt in the U.S. market. The American Petroleum Institute (API) reported a significant 8.156-million-barrel drop in U.S. crude oil supply as Saudi crude tankers have been offloaded, and there are no more coming, and U.S. oil production continues to fall. The Energy Information Administration reported U.S. oil production fell a whopping 5.3% in April and March.
U.S. oil production fell by 670,00 barrels a day in April and March and was down by 800,00 barrels a day from November. If we go by weekly, the EIA was down about another million barrels a day of production since then. U.S. production has peaked for the foreseeable future as shale financials do not make sense, and capital for oil has dried up.
In the meantime, demand for oil is still recovering. U.S. gasoline demand is being used as a barometer as to the success and speed of state economic re-opening. If API data is correct, it appears that gasoline demand is continuing to rise. The API reported that the gasoline supply fell by 2.459 million barrels. On the other hand, we have a 2.638-million-barrel increase in distillates as airline capacity is still way down. Yet more flights in July should start working off some jet fuel supply. United Airlines says it is going to add 25,000 flights to its August schedule.
Does the air seem cleaner? It might, and instead of peak oil or peak demand, we may be talking about peak carbon.
Reuters reports that “Global oil demand and carbon dioxide emissions probably peaked in 2019 as the COVID-19 pandemic will have a lasting impact on both energy,” consultancy DNV GL said on Wednesday. The Norway-based consultancy, which advises both petroleum and renewable energy companies on risk management and technology, said global energy use would be 8% lower in 2050 than previously expected due to the impact of the pandemic. “Lasting behavioral changes to travel, commuting and working habits will also decrease energy usage and lessen demand for fossil fuels from the transport sector as well as from iron and steel production,” DNV GL said in a statement about its research on the impact of the pandemic on oil demand and emissions. “While we expect oil demand to recover next year, we think that it’s likely that it will never reach the levels seen in 2019,” Sverre Alvik, head of DNV GL’s Energy Transition Outlook, told Reuters.