This past quarter was another tough one for the US economy. Industrial production sank to a record low in March below 70% of capacity. The resulting lower demand for fuels is sending storage levels toward record highs. The EIA reported this morning that natural gas rose another 21 billion cubic feet (bcf) last week to arrive at 34.8% higher than last year and 22.5% above the five-year average at this time of year.
And petroleum inventories are sky-high as well, as the weekly EIA petroleum report shared. Crude oil climbed 5.6 million barrels (Mb) to ~17% above last year and the highest level since September 1990. Gasoline demand was down 4.2% last week, sending inventories above last year levels and above average. Distillate storage is more than 31% above last year, supported by demand that was 7.4% lower than the same week in 2008. And propane inventories rose to ~60% above last year on 17.5% lower demand.
And it turned out that the small drop in US crude production I wrote about last week was a fleeting phenomenon. Output recovered to 5.482 Mbd, the highest level in several months. Whether it will reach 5.5 Mbd is anybody’s guess as domestic oil drilling wanes.
Attempts at a bull run in fuel prices will take a while to arrive as recession-induced low demand maintains its grip on the energy market. Solar’s ability to compete with the resulting low energy price is diminished unless module producers are able to accelerate their cost reductions in the months ahead. I anticipate a return to higher energy prices this Fall and beyond that will expand the solar and wind markets to new records.
I’ll keep you posted on major developments in supply, demand, and price as it relates to our much-needed Sustainable Energy Transition.