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Column: Oil market rebalancing largely complete, except for jet fuel

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U.S. petroleum consumption and inventories have returned to normal after the pandemic and volume war last year, with the significant exception of jet fuel, where demand remains suppressed by travel restrictions.

FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo

The volume of petroleum products supplied to domestic customers excluding jet has climbed above the five-year average for the first time since the onset of COVID-19 in the United States in March 2020. The draw down has reversed most of the 194 million barrel build between the middle of March and end of the second quarter last year .

Relative to the previous five-year average, surplus inventories are in the 40th percentile, down from the 92nd percentile last July, indicating stocks are somewhat tight. On any measure, U.S. petroleum inventories are back within the range of normal year-to-year variability, suggesting all or nearly all of the oversupply from last year has been digested.Despite inventory normalisation, production of crude and refined products is running well below consumption, implying stocks will decline further over the next few months.

Either OPEC+ must raise its output, or prices will continue to escalate until U.S. shale firms fill the production-consumption gap.

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