Heavy gasoline consumption fuels record oil demand in the United States

Demand for oil in the United States continues its upward trajectory, hitting an all-time high last week, as commodity inventories fell to their lowest level in three years.

If the demand trend continues, oil prices could rise further for the rest of the year, some analysts say.

Despite the fact that the impact of Hurricane Ida on the oil sector skewed the data in this week’s inventory report by the US Energy Information Administration, the product provided – the EIA’s proxy for demand – continued to accelerate.

Crude Oil Inventories reduced by 1.5 million barrels for the week through Sept. 3, with significant drawdowns in fuel inventories as well, the EIA said in its weekly report. At 423.9 million barrels, crude oil inventories are below the five-year average for this time of year.

Gasoline inventories fell 7.2 million barrels over the period, compared to a 1.3 million barrels per day pullback the week before. In middle distillates, the EIA estimated an inventory drawdown of 3.1 million barrels for the week of September 3, a larger drop from the 1.7 million barrels drawdown the week before.

Finished motor gasoline supplied in the week until September 3 rose to 9.608 million barrels per day (bpd), compared to 9.578 million bpd the previous week.

This implied gas request was “a healthy read for Labor Day weekend,” AAA noted Thursday.

On a four-week average, implied demand for gasoline in the United States stood at 9.523 million bpd, up 8.9% from the four-week average demand of 8.742 million bpd for those weeks. in 2020, according to EIA data.

The four-week average demand for jet fuel increased 65.3% from a year ago to 1.622 million barrels per day. Demand for distillate increased 11.2 percent to 4.126 million barrels per day.

“The US fuel demand figures in the weekly EIA data have shown a healthy and continuing recovery. Gasoline demand of 9.52 million b / d over a four-week average is around 98% of corresponding 2019 levels, while distillate demand at 4.13 million b / d is at 105 % ”, Vanda Insights noted in a note early Friday, commenting on EIA figures.

John Kilduff, Partner at Again Capital, commented for Reuters on the latest figures for implicit gasoline demand in the United States:

“This number of gasoline requests is very high and it has been the model all season. We didn’t see the seasonal decline we saw after July 4th. ”

Robust demand could be accompanied by low inventories to support oil prices for the rest of the year, an analyst with the energy research department HFI Research wrote. In search of the alpha.

According to EIA data, total liquids recorded a draft of 10.4 million barrels in the last week of reporting, with total liquids inventory now plunging below 2018 levels.

“On the demand side, implied US oil demand on a four-week basis continues to climb despite this week’s hurricane data,” HFI Research said.

Analysts say if demand remains robust, total US liquids inventories – including Strategic Petroleum Reserve (SPR) – could fall below the 2010-2014 average.

“And as long as the fundamentals show continued decline in inventories, oil prices will go up until the end of the year,” according to HFI Research.

But not all analysts are optimistic about gasoline demand in the United States. Some say that nearly a dollar more than average US prices at the pump and at the end of the driving season will lower demand for motor gasoline in the coming weeks.

As of Sept. 9, the national average price for a gallon of regular gasoline was $ 3,181, up from $ 2.213 / gallon at the same time last year, according to data from the AAA.

“GasBuddy’s gasoline demand data shows seasonal weakness as the EIA proxy inexplicably shows continuing strength that does not correspond to reality. Certainly a skeptic given the sharp drops in demand in the wake of Ida, particularly in the northeast ”, Patrick De Haan, head of petroleum analysis for GasBuddy, tweeted Thursday, commenting on the EIA’s implicit data on demand.

By Tsvetana Paraskova for OilUSD

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Felix J. Dixon