API report shows rising U.S. crude production helps offset global demand
Global demand for oil is pushing toward the 100 million barrels per day (bpd) threshold this year, but the American Petroleum Institute (API) said U.S. crude production is keeping pace.
The API’s latest energy outlook projected the second quarter of 2018 would turn out to be a good one for U.S. consumers who have enjoyed a combination of overall economic growth driving oil demand, and enough crude being produced to buffer them from any major price spikes at the gas pump during early summer.
“Every barrel produced at home adds to the global oil supply, whether it is consumed here or abroad, and domestic oil prices have remained lower than international ones as a result,” said API Chief Economist Dean Foreman. “The more (oil) we add, that improves our chances of putting downward pressure on prices at the pump.”
Any downward pressure on prices, however, might not have been noticed by consumers. The API’s own closely watched monthly statistics pegged May crude prices at $2.987 per gallon, up 11.4 cents from April and 48.4 cents from the previous May. Crude averaged $69.98 per barrel for West Texas Intermediate (WTI), $3.73 higher than April and a solid $21.50 above May 2017. The discount for WTI to Europe’s benchmark Brent crude averaged $6.61 per barrel in May compared to $6.50 per barrel last December.
Foreman and his team reported bullishness across the consumption board:
• Gasoline demand for the first five months of 2018 was the highest on record
• Refinery throughput for the same period reached 91.4 percent, the highest level since 2003
• Jet fuel demand was the highest ever for the month of May
• Residual fuel oil consumption, led by the shipping sector, increased 4.1% over last May.
Nevertheless, the report concluded that the United States was holding its own in terms of production and was able to fend off the worst of the sticker shock. “World oil demand has approached 100 million bpd for the first time, and U.S. supply growth has been up to the challenge, meeting virtually all global oil demand growth so far in 2018,” said Foreman.
In fact, with U.S. crude production increasing around 2 million bpd over 2017, the United States could find itself in a surplus situation in Q2 regardless of OPEC’s jockeying on production.
Crude production in May averaged 10.6 million bpd while total U.S supply, including natural gas liquids (NGLs) and other liquid fuels, was up by more than 2 million bpd from a year ago. Exports of U.S. crude hit 2.1 million bpd in May and imports slipped to a 50-year low as the dollar exchange rate dipped 1.9 percent in May compared to May 2017, which tends to add some firmness to prices in the United States.
