API MSR: U.S. Petroleum Demand and Imports Higher, Supply Languished
Posted October 15, 2021
API’s new Monthly Statistical Report (MSR), based on U.S. petroleum primary market data through September, reinforced a combination of developments that has been recurrent so far in 2021 – that is, demand outpaced supply, inventories fell and, consequently, imports and prices rose.
Historically, this combination of factors has also led to further market tightening, which could put additional upward pressure on costs and prices.
The underlying drivers come back to the basics of demand, which reached a record high for the month of September at 20.6 million barrels per day (mb/d), and supply that has remained muted due to the industry’s continued financial, work force and supply chain constraints, coupled with a lack of policy support as we discussed here.
The key implication of these data is that economic growth and petroleum fuels’ demand have gone hand in hand – despite the 2020 COVID-19 recession and policy impetus toward alternatives. In fact, we saw the highest ever refining and petrochemical demand for other oils last month – that is, intermediate products in refining and petrochemicals. We also saw motor gasoline and diesel fuel demand that exceeded their respective levels in September 2019. With strong marine transportation activities, residual fuel oil demand was about on par with its level in 2019. Therefore, the only major refined product that trailed its 2019 level was kerosene-type jet fuel, which was only 213,000 barrels per day (kb/d) lower than its September 2019 level.
Contemplate for the moment what these data are indicating. Despite the economic dislocation associated with the pandemic, its ensuing recession and consequent fuel switching, petroleum demand has remained solid and by far the top enabler of industrial and personal transportation.
By contrast, domestic supply remained challenged. U.S. oil production fell to 10.6 mb/d, due in part to the prolonged impacts of Hurricane Ida along the Gulf Coast. As of Sept. 23, nearly a month after Ida’s landfall on Aug. 29, more than 16% of Gulf oil production remained shut in, according to the Bureau of Safety and Environmental Enforcement (BSEE).
U.S. refining activity slipped by 3.9% month on month to 15.8 mb/d, but this activity level still drew upon crude oil inventories and required higher imports. Consequently, U.S. crude oil inventories (excluding the Strategic Petroleum Reserve) fell to 419 million barrels, their lowest for any month since September 2018. Meanwhile, U.S. crude oil imports increased by 15.8% year on year to 6.3 mb/d.
Although the U.S celebrated a milestone in 2020 of becoming a petroleum net exporter on an annual basis for the first time since 1958, in September the U.S. returned to being a net importer of 1.7 mb/d, which was more than twice its highest net imports which occurred in six of the past seven months. The U.S. Energy Information Administration (EIA) now expects the U.S. to remain a petroleum net importer in 2021 and 2022.
Despite supply and energy-related pressures, leading economic indicators have 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 will continue to rise, at home and abroad.
Other September 2021 MSR highlights:
- Motor gasoline demand (9.2 mb/d) fell minimally at the end of the summer driving season.
- Solid distillate demand exceeded 4.0 mb/d.
- Jet fuel demand decreased seasonally but continued to close its gap versus 2019.
- Marine shipping sustained residual fuel oil demand.
- Highest gasoline prices for September since 2014.
- Leading indicators suggest industrial and economic growth, but heightened consumer concerns.
- Refinery inputs and capacity utilization – monthly changes relatively stronger than in 2017-2020.
Please see the latest API Monthly Statistical Report (MSR) for details, product-level analysis and data.
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.