The U.S. Energy Information Administration (EIA) reports that the world oil glut in place since late 2016 has evened out, bringing the price of oil up and diesel along with it.
In other words, world consumption of oil and its derivatives has gradually overtaken oil supplies.
EIA reported today that total world petroleum and other liquids consumption increased by an estimated 1.9 million barrels a day (b/d) between the first quarters of 2017 and 2018, exceeding the growth in production and resulting in inventory declines.
This consumption growth occurred primarily in the United States (0.6 million b/d), China (0.5 million b/d), and other Asian countries not in the Organization for Economic Cooperation and Development or OECD (0.6 million b/d).
The EIA says total liquid fuels inventories are returning to five-year average levels in the United States and the OECD countries.
Between January 2017 and April 2017, U.S. and OECD crude oil days of supply fell by 11.5 and 4.5 days, respectively, to 59.2 and 60.6 days. U.S. crude oil and other liquids days of supply fell from 12 days higher than the five-year average to 3.6 days lower. OECD crude oil and other liquids days of supply dropped from 7.4 days higher than the five-year average to 1.6 days lower.
The U.S. average diesel fuel price increased nearly 7 cents to $3.24 per gallon on May 14, nearly 70 cents higher than a year ago.
Midwest prices rose over 8 cents to almost $3.18 per gallon, West Coast and Rocky Mountain prices each rose nearly 7 cents to $3.73 per gallon and $3.32 per gallon, respectively, and East Coast and Gulf Coast prices each rose nearly 6 cents to $3.24 per gallon and $3.01 per gallon, respectively.
However, EIA says an oil surplus will return, just not as big a one as that encountered previously.
In its “May 2018 Short-Term Energy Outlook,” EIA predicted that both U.S. and OECD petroleum and other liquids inventories will return to surpluses compared with their five-year averages, “although on a smaller scale compared with the period between 2015 and 2016.”
As always, however, there is additional uncertainty about future global oil market balances because of such things as the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and the continued instability in Venezuela, EIA notes.