MSR: Reading Between the Lines on Energy Recovery
Posted October 15, 2020
While objective interpretation of economic and energy data always is challenging, it’s especially difficult in this pandemic-impacted year to determine whether current data signal good news for consumers, the broader economy, and the natural gas and oil industry that is a key driver in the U.S. economy.
That said, API’s new Monthly Statistical Report (MSR) shows progress. Here’s what we see in the latest petroleum data from September, and it says a lot about resilience amid stressful circumstances.
API’s primary data on U.S. petroleum markets for September suggested that crude oil supply and exports rose, while demand – which since 1945 has dropped on average by 4.3% each September following the peak summer driving season – fell by much less than normal. In other words, 2020 didn’t exhibit typical seasonality, since there was less discretionary travel through the COVID-19 pandemic and relatively more driving out of necessity. Thus, it’s not surprising that petroleum consumption held up better than average in September.
Consequently, with continued recovery through the 2020 COVID-19 recession, deliveries of motor gasoline and diesel/distillate fuel oil were down by single-digit percentages from their respective September 2019 levels. Specifically, U.S. consumption of diesel fuel and motor gasoline in September was 5.8% and 7.0% lower, respectively, in September versus one year ago (y/y).
As perspective, consider that deliveries in April were down by 38.7% y/y for gasoline and 14.9% for diesel/distillate fuel oil. While decreased deliveries have reflected extraordinary economic and energy market circumstances, the progress has nonetheless been remarkable.
So, if you’re sitting at home and contemplating the energy future, the data clearly show that not everyone is stuck at home because of COVID-19. Notably, motor fuels consumption in urban areas appears to have been impacted relatively more than in rural areas. This has been due to more stringent measures taken in densely populated areas to stem the transmission of COVID-19, but also due to the mass exodus from some major cities, as urban dwellers have worked remotely or relocated.
Separately, we know supply chains have been disrupted by Gulf Coast hurricanes that hampered refining activity and reinforced inventory accumulation. Despite these challenges, U.S. petroleum exports exceeded imports for the month – a sign that we’re not alone in seeing the global economy and oil demand pick up.
Here are the highlights from this month’s MSR, again, based on September data:
- U.S. petroleum demand – 17.9 million barrels per day (mb/d) – narrowed the gap vs. 2019 levels.
- U.S. crude oil production – rebounded to 11.1 mb/d.
- Refinery throughput – (14.1 mb/d, 75.5% capacity utilization) slipped with hurricane disruptions.
- The U.S. sustained petroleum net exports.
- Total petroleum inventories – (crude oil and refined products, ex-SPR) reached a record high.
In addition to demand holding up relatively well, snapshots of U.S. petroleum supply and inventories suggest: 1) crude oil production has remained resilient despite minimal drilling activity due to solid productivity, returns of shut-in production and bringing drilled but uncompleted wells on stream; and 2) hurricane-related disruptions affected Gulf Coast refining activity and contributed partly to higher inventories.
Interestingly, crude oil inventories of 495.3 million barrels fell by 1.5% between August and September – and stood 6.9% below the high of the crude supply glut in June. When we look at major refined products, their stocks also fell in September. Yet, total inventories rose, which suggest that other oils, like naphtha and gasoil for the refining and petrochemical sectors (which make up about one quarter of total U.S. petroleum demand), were likely disrupted along with refining activity for the month and contributed to the record high stocks.
These signs have continued to indicate that markets are rebalancing, which is good news. Let’s hope that, once the election politics pass, the economy and energy market continue to heal and enable growth in 2021.
About The Author
Dr. R. Dean Foreman is API’s chief economist and an expert in the economics and markets for oil, natural gas and power with more than two decades of industry experience including ExxonMobil, Talisman Energy, Sasol, and Saudi Aramco in forecasting & market analysis, corporate strategic planning, and finance/risk management. He is known for knowledge of energy markets, applying advanced analytics to assess risk in these markets, and clearly and effectively communicating with management, policy makers and the media.