API MSR: Highest Petroleum Demand Since 2019; Imports and Prices Rose in July

Dean Foreman
Posted August 19, 2021

As the summer driving season motors on, we’re watching not only the impacts of seasonally higher gasoline prices on U.S. households, but also costs in other areas affecting family budgets – and whether those costs are seasonal or longer-lasting. This is the context for API’s new Monthly Statistical Report (MSR), based on July data.

As we discussed here, U.S. consumers have benefitted recently from fuels and products derived from relatively inexpensive domestic crude oil and natural gas – well below international price levels. This was due to abundant domestic crude oil production. 

That’s changed now. Domestic production is lower, partly due to the aftereffects of the 2020 COVID-19 recession as well as the delay or cancellation of energy projects that take years to complete.  In this sense, the pulse of U.S. petroleum markets is vital, and API’s primary data can offer a leading perspective.

In July 2021, summer driving and gasoline demand led to the highest U.S. petroleum demand since November 2019, the MSR shows. Demand increased for the fifth consecutive month despite crude oil and gasoline prices rising to their highest levels since 2014.

U.S. crude oil and natural gas liquids production responded positively to the higher prices and together added more than 0.3 million barrels per day (mb/d) between June and July.  Drilling activity, which is a leading indicator of production, also picked up for oil and natural gas, according to Baker Hughes.

However, crude oil inventories still fell in July to their lowest level since December 2019, which was a 15.8% (year over year) decrease to 6.8% above the minimum of five-year range. 

A combination of demand generally outpacing supply, lower inventories and higher imports has historically been a recipe for higher prices.

Additionally, leading economic indicators remained positive. API’s Distillate Economic Indicator^™ highlighted continued growth of U.S. industrial production and broader economic activity.  If the economy remains on track, there’s a good chance that the demand for oil and natural gas couldcontinue to rise, at home and abroad.

Other July 2021 MSR highlights:

•             U.S. petroleum demand (20.6 mb/d) remained solid with summer driving.

–             Gasoline demand rose to 9.5 mb/d with summer driving.

–             Strongest jet fuel deliveries in 18 months.

–             Record July petrochemical demand for other oils.

•             U.S. crude oil production (11.4 mb/d) and NGL production (5.4 mb/d) stepped up in July.

•             U.S. a petroleum net importer in July with higher imports and lower exports.

•             Highest sustained refinery capacity utilization (91.4%) since Dec. 2019.

•             Lowest crude oil inventories since Dec. 2019.

More broadly for U.S. households, the U.S. Federal Reserve sees elevated prices for consumer goods for a period but expects the pressure to ease. Still, complaints about high prices for homes, vehicles and household durable goods were cited as the reason the University of Michigan’s consumer sentiment index in July reverted to its lowest level since February.  The survey’s chief economist, Richard Curtin, noted “there is growing evidence that an inflation storm is likely to develop on the not-too-distant horizon.”  

There are multiple reasons why higher price inflation could be a concern, including the delayed impact of higher rents and incorporation of the Bureau of Labor Statistics’ consumer expenditure survey (CEX) – as well as the apparently structural nature of many recent changes to oil and natural gas markets.

Against this backdrop, gasoline and other energy costs that fell in real terms over the past decade – but have risen recently – have been a key to household budgets, enabling them to expend more on other essentials.  The evidence is clear that abundant domestic oil production has historically placed downward pressure on prices throughout the value chain. If the economy continues to recover, the adequacy of domestic and global oil supplies could remain a pressure point at the micro/household and macro levels.

Please see the latest API Monthly Statistical Report (MSR) for details and product-level analysis and data.