Demand, production remain strong for refined petroleum products

May 10 (UPI) -- Implied demand for refined petroleum products such as gasoline increased from week-ago levels, eating into commercial storage levels, U.S. Energy Department data showed Wednesday.

The U.S. Energy Information Administration, the statistical arm of the Energy Department, reported that refineries were working at 91% of the peak capacity over the week ending May 5, a slight increase from the prior week.

Gasoline production increased in response, from 9.4 million barrels per day on average to 9.8 million barrels per day to May 5.

The amount of total refined petroleum products sent to the market was up 2.5% over the same period last year. Analysts use that as a metric for implied demand. For just gasoline, the total volume supplied was up 2.2% from the same period last year.

The amount of gasoline in commercial storage, meanwhile, declined from week-ago levels to fall to 7% below the five-year average for this time of year.

Implied demand figures may be a reflection of recent trends in commodity prices. Market watchers had expected the start of production curtailments from OPEC+, the core group of members of the Organization of the Petroleum Exporting Countries and non-member state allies such as Russia, to push crude oil prices into the triple digits.

But concerns about the health of the global banking sector and the potential for a recession in major Western economies has led to a downturn in prices. EIA in its monthly market report for May pointed to "ongoing considerations" of weaker economic conditions, the "perceived risk" in finance and "persistent inflation" in lowering its estimates for commodity prices.

West Texas Intermediate, the U.S. benchmark for the price of oil, was trading in the $73-per-barrel range on Wednesday, down nearly $10 per barrel from early April. The price for WTI is expected to average $73 per barrel for 2023, about $6 per barrel lower than the EIA's estimate in April.

That is contributing to lower gasoline prices at the retail level. Travel club AAA listed a national average retail price of $3.53 per gallon for Wednesday, down about 7 cents from month-ago levels.

The EIA in its monthly market report for May estimated retail gasoline prices would average $3.33 for the year, a revision lower from its $3.42 estimate in the April report.