MSR: U.S. Petroleum Demand Up, Pushing Domestic Production to Keep Pace
Posted May 20, 2021
API’s primary data for April 2021 evidenced momentum for the broader U.S. economic recovery, as petroleum demand and refining activity rose, supply remained solid and leading economic indicators pointed higher.
The April headline figure was that total U.S. petroleum demand of 19.6 million barrels per day (mb/d) rose by 2.5% from March and to within 3.5% of its level in April 2019, which was its highest for the month in 11 years.
Contemplate that for a second: For all of the dislocation and continuing issues with recovery from COVID-19 pandemic, total petroleum demand in April was within a sliver of where it was that record-setting April of 2019.
Gasoline demand of 8.9 mb/d led the monthly increase and climbed to within 5.4% of its April 2019 record level. This signals that, as the economy has continued to recover, there has been a clear need for personal transportation.
Another strong point for demand has been refining and petrochemical needs for other oils – naphtha, gasoil, propane/propylene – of 5.4 mb/d, which was a record for the month of April and stood more than 10% above its April 2019 level. This reflected continued needs for PPE, medical plastics, films and packaging materials, which have remained solid even as we have moved past seasonal winter heating needs for propane.
Additionally, leading economic indicators – including API’s Distillate Economic Indicator™ – broadly accelerated in April and suggest gains in industrial production and economic growth have continued.
For all of the good news for the economy and the industry, a potential tension is that U.S. oil production has not kept pace with demand, having remained steady around 11.0 mb/d through the first four months of 2021. In fact, sustaining this production has required productivity gains to offset historically low drilling activity.
As oil demand has recovered but supply remained steady, the U.S. was a petroleum net importer in April for a second consecutive month. With recent WTI crude oil prices around $65 per barrel, it’s notable that U.S. drilling activity has remained relatively weak. Consequently, there appears to be a growing need for domestic oil supply to rise to meet demand.
For details and analysis, please see the latest MSR as available at no cost on the chief economist’s section of API’s website, linked here.
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.