U.S. Petroleum Markets Continue Their Comeback in June

Dean Foreman
Posted July 16, 2020

Although we have a long way to go for U.S. petroleum markets to recover to pre-pandemic levels, the comeback broadly continued in June as state economies re-opened despite ongoing challenges with COVID-19. This is seen in API’s Monthly Statistical Report (MSR) for July. 

With the daily news flow about COVID-19 – from America Shuts Down Again to More Than Half of States Trending Poorly – it has been challenging for oil markets to discern what’s actually happening. The MSR provides the most timely and comprehensive snapshot of U.S. markets for crude oil and major refined products, based on weekly surveys of up to 90% of the industry.

Here’s what we see in this month’s MSR, based on June data: 

• Petroleum demand up 17.6 million barrels per day (mb/d). This was led by increased demand for motor gasoline, which rose by 1.4 mb/d in June. Gasoline demand has risen by 2.5 mb/d since April.
• Record refinery increases. Throughput and capacity utilization were up by record amounts in June.
• Oil production down. U.S. crude oil production fell to 11.0 mb/d – a seventh consecutive monthly decline – after weak drilling activity.
• Record crude oil inventory levels. Crude oil inventories set a new record of 538.8 million barrels as demand continued to be down more than supply in recent months. This kept total U.S. petroleum inventories (crude oil and refined products, excluding the Strategic Petroleum Reserve) near their record levels.
• U.S. petroleum imports up. Imports increased by 1.2 mb/d, more than offsetting a 0.2 mb/d rise in exports. The U.S. petroleum trade balance to net imports widened to 1.3 mb/d – the highest since July 2019.

Total U.S. petroleum demand was down by 14.6% year over year (y/y) despite the rebound since April – well below the five-year range.  Notably, we observe for June that U.S. gasoline demand in urban areas (+20.6% month over month) rose about twice as fast as that in rural areas (+11.1% m/m), which appeared to reflect state re-openings coupled with substitution for driving in lieu of public transit or flying.

To put this all in perspective, the ultimate rise in inventories signaled that the record decrease of more than 1.7 mb/d in crude oil production the U.S. has experienced since March still hasn’t been enough to offset the decreased refinery throughput and demand for motor gasoline, diesel and jet fuel, and naphtha/gasoil (“other oils”). 

So, even as demand has risen and consequently West Texas Intermediate crude (WTI) oil prices experienced a record increase of 131% ($21.76 per barrel) since April, pressure remains on ample market supply. 

Crude oil futures prices currently reinforce this view.  In futures markets, expectations after the recent oil price rebound have appeared tepid, as WTI price futures at the end of June reflected only a 2.7% increase within 12 months per data from CME Group.

Overall, June marked genuine progress for the recovery of petroleum markets.  We continue monitor the path of COVID-19 and economic growth, but with state re-openings, substitution for public transit and flying, plus the summer driving season, sources of resilience have been evident despite these challenging times. 

For details and analysis, please see the full API Monthly Statistical Report (MSR) for July, available free of charge here.