Energy Report: No More Glut

Do you remember the oil glut? Oh, sure you do. The COVID-inspired oil glut that many people said was so large that we would never see it fully disappear. Just one year later, supplies of oil are falling at the fastest pace they have since the pre-COVID-19 days. Now there are concerns that there will not be enough oil around to meet growing demand. The underinvestment in fossil fuels is starting to rear its ugly head as demand is mounting a comeback faster than supplies can keep up. We are seeing production fall as there is not enough new drilling to offset the decline rate from existing wells.

Those concerns were magnified when the Energy Information Administration (EIA) released their weekly report that showed U.S. crude oil inventories fell by 7.6 million barrels last week. That drawdown in crude inventory was the 5th in the row and would have been larger if it weren't for 1.7 million barrels released from the US Strategic Petroleum Reserve. Currently, at this rate, U.S. oil inventories are falling at a pace that exceeds over 1,000,000 barrels a day. That pace is likely to continue, further cutting into the U.S. oil supplies that are already 6% below the average for this time of year.

Pump Jack, Oilfield, Oil, Fuel, Industry, Petroleum

Image Source: Pixabay

There is also a lot of concern about the dramatic decreases that we've seen in the Cushing, OK storage hub. If you remember in the height of the COVID-19 supply glut, there were fears that the Cushing storage hub would be unable to store crude as its storage was tapped out. Now there is a concern on the other side of the equation that supply is falling so fast that the hub could fall below their minimum operating levels by the end of next month.

U.S. energy production fell last week to 11.1 million barrels a day which means we are going to be more dependent on oil imports from other countries. U.S. crude oil imports last week averaged 6.9 million barrels a day and that was up 197 thousand barrels from the previous week. We expect that U.S. oil imports are going to have to rise to meet growing demand.

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William K. 1 month ago Member's comment

Adding more wells is not needed. The previous supply seemed to be adequate, the restarting of production is what is slow. But none will admit to being slow, as it does not look so very good.