Texas crude production sets new record as U.S. demand climbs to seasonal peak

(Bloomberg) – Crude output in Texas surged to a record in May just as U.S. demand climbed to a fresh seasonal peak.

Texas production, which accounts for about 40% of the nation’s crude oil output, climbed to 5.49 MMbpd in the period, the highest in monthly government data going back to 1981. Meanwhile, oil demand in the U.S. surged to 20.8 MMbpd, the highest-ever seasonal level, according to Energy Information Administration figures released Monday.

The surge in consumption is striking given that it came while markets were gripped by weakening demand prospects amid rising interest rates. West Texas Intermediate futures prices plunged more than 11% in May but have since recovered to trade above $80 a barrel.

The monthly oil demand figures are 4% higher than what the EIA’s weekly estimates showed. The jump was led by an increase in the country’s use of natural gas liquids, largely for petrochemical processes that make plastics. Demand for ethane in particular soared to a record high at 2.2 MMbpd.

On the supply front, while most operators have slowed their pace of drilling, companies have been turning on drilled-but-uncompleted wells, known also as DUCs, and that’s been helping to raise output.

The rise in production in Texas, which makes up a large chunk of the prolific Permian basin, is coming at a time when global supplies are in deficit following cuts from Saudi Arabia and its OPEC allies. As oil majors ramp up operations in the U.S., output from Texas is likely to grow further. Oil and gas production from Exxon’s Permian wells reached a record equivalent of 622,000 bbl during the April-to-June period and is on track to increase 10% this year.