Fuel demand in the United States has been gradually increasing in recent weeks, clawing back over half of the consumption lost during the first couple of weeks of lockdowns. Gasoline demand has been rising since early April as lockdowns eased and people started driving more. Distillate fuel and jet fuel demand, however, is still struggling--especially jet fuel.
Gasoline production has also risen since April lows, but growth has been much slower than the pace of consumption recovery, suggesting that there are still sizeable fuel stocks that refiners need to sell first before ramping up crude processing rates and capacity utilization to pre-crisis levels.
Refiners across the U.S. are not rushing to quickly increase processing rates, leaving the market to first draw down the fuel oversupply, Reuters market analyst John Kemp says.
According to the latest weekly inventory report of the Energy Information Administration, refinery crude oil inputs and capacity utilization have been rising at a slower pace than the implied gasoline consumption.
The EIA reported an inventory draw of 1.7 million barrels of gasoline for the week to June 19, compared with a decline of the same size for the previous week. Gasoline production last week averaged 8.8 million bpd, up from 8.4 million barrels daily a week earlier.
In distillate fuels, where demand has been slower to recover than in gasoline, the EIA reported an inventory rise of 249,000 barrels for the week to June 19. Production of distillates averaged 4.6 million bpd last week, compared with 4.5 million bpd a week earlier.
Refinery runs averaged 13.84 million bpd, up from 13.6 million bpd a week earlier. Compared to the same week a year ago, refinery crude oil inputs were down 20.2 percent. Production of motor gasoline at 8.8 million bpd was still 16.3 percent lower than in the same week last year when gasoline production was 10.512 million bpd.
Jet fuel is still profoundly depressed, with production at 694,000 bpd, down by 63.6 percent from the 1.9 million bpd of jet fuel produced in the same week last year.
Gasoline demand stood at 8.6 million bpd in the week to June 19, up from 7.87 million bpd from the prior week, but still well below the 9.466 million bpd demand in the same week in 2019.
Gasoline demand is returning, but it still has a long way to go to reach its ‘normal’ levels for this time of the year.
Refinery capacity utilization is rising much slower as refiners and the market have to draw down excess fuel inventories that surged at the start of the lockdowns.
U.S. refinery capacity utilization has been slowly creeping up over the past weeks, by less than 1 percentage point each week, to reach 74.6 percent in the week to June 19, from a low of 67.6 percent in the third week of April. To compare, in the third week of June last year, refinery utilization was 94.2 percent as demand was soaring with the start of driving season. Typically, U.S. capacity utilization is around 95 percent in the summer season.
If refiners continue operating at much lower-than-normal utilization rates, they could help draw down the excess fuel stocks faster.
