U.S. oil stocks normalized after the epidemic

According to a column report from Reuters on May 7, after the Saudi-Russian price war and the first wave of the epidemic last year, US oil inventories have soared and are now back to normal.

Last week, the total stocks of crude oil and refined oil products other than the Strategic Petroleum Reserve were only 17 million barrels, 1.

Taking into account the historical volatility of these two time series, the remaining surpluses of crude oil (7 million barrels) and refined oil (11 million barrels) are not significant compared to the 5-year average.

Since its peak at the end of June last year, the surplus of crude oil (75 million barrels) and refined oil (101 million barrels) has been reduced (see the US Energy Information Administration’s weekly report on the status of oil on May 5).

Due to the decline in the production of OPEC+ and U.

Therefore, the actual spot price of Brent crude oil is currently at or slightly higher than the long-term average, reflecting the rebalancing of the market.

The 6-month spread of Brent crude oil has entered a clear spot premium, which is much higher than its long-term average level, as traders expect inventories to be balanced to below normal levels in the second half of this year.

On the U.

However, the region’s crude oil surplus decreased from 76 million barrels (33%) in early July, and the increase compared to the five-year average was also lower than the trend in recent years.

Refineries and storage terminals on the Gulf Coast are connected to the Brent crude oil market, so the emptying of local oil depots has pushed up spot prices and spreads.

The reduction in US oil inventories is part of the broader normalization of all OECD countries.

Thirteen months after the most serious overproduction crisis in the history of the oil industry, the market has basically returned to normal, much faster than many analysts predicted at the time, but consistent with the previous cycle of boom and bust.

The key exception is the aviation fuel market.

The final normalization, including OPEC+ and U.

Compiled by Qiu Yin from Reuters

The original text is as follows:

Column: US petroleum stockpiles normalise after pandemic surge

US petroleum inventories have returned to normal after ballooning during the Saudi-Russian volume war and first wave of the coronavirus epidemic last year.

　　Total stocks of crude oil and refined products outside the Strategic Petroleum Reserve last week were just 17 million barrels, or 1.

　　Small remaining surpluses to the five-year average in both crude (7 million barrels) and products (11 million barrels) were not significant given the historic volatility in both time series.

　　Surpluses in crude (75 million barrels) and products (101 million barrels) have shrunk since peaking at the end of June last year (“Weekly petroleum status report”, US Energy Information Administration, May 5).

　　Excess stocks have been absorbed as a result of lower production by OPEC+ and US shale firms, and the recovery in oil consumption.

　　In consequence, Brent spot prices are now trading at or slightly above their long-term average in real terms reflecting the rebalancing of the market.

　　And Brent's six-month calendar spread has moved into a significant backwardation, well above its long-term average, as traders anticipate stocks will move through balance to below normal in the second half of the year.

　　On the US Gulf Coast, the major refining hub and centre for seaborne oil pricing in North America, commercial crude stocks are still roughly 14 million barrels, or 5%, above the pre-epidemic five-year average.

　　But the regional surplus has shrunk from 76 million barrels or 33% in early July and the increase compared with the five-year average is below the trend in recent years.

　　Gulf Coast refineries and storage terminals are connected to the Brent market so the emptying of local tank farms has boosted spot prices and calendar spreads.

　　The reduction of petroleum inventories in the United States is part of a broader normalisation across all OECD countries.

　　Thirteen months after the worst overproduction crisis in the oil industry's history, the market has largely returned to normal, much faster than many analysts predicted at the time, but in line with previous boom-bust cycles.

　　The critical exception is the market for jet fuel, where continued restrictions on international passenger aviation continue to depress global oil consumption by several million barrels per day.

　　Final normalisation, including a return to pre-epidemic production by OPEC+ and US shale producers, depends on the timing and scale of a return to passenger flying.