MSR: Transportation Fuel Demand Ticks Up Ahead of Summer Driving Season

Faustine Jean-Louis
Posted April 20, 2023

API’s latest Monthly Statistical Report (MSR™), with primary data through March, showed U.S. petroleum demand of 19.8 million barrels per day (Mb/d), reflecting increased seasonal use for transportation fuels as we approach the summer driving season.

The country exported record-level volumes of crude and petroleum products last month, increased domestic refining activities and inventories, and increased crude oil and liquid fuels production (excluding other oils) amid falling economic sentiment and unchanged drilling activity compared to February.

MSR™ highlights:

• The country saw a 300,000 barrel per day (b/d) increase in transportation fuel demand from February to March, despite ongoing macroeconomic challenges, that helped explain a 500,000 b/d decline in demand for “other oils” (naphtha, gasoil, propane/propylene), the lowest since April 2021.
• The U.S. added 77,000 b/d in crude oil production, month on month (m/m) in March for a total of 12.4 Mb/d. That was 695,000 b/d above the five-year average for March but remains 592,000 b/d below its all-time peak in November 2019.
• Refinery throughput of crude oil (15.9 Mb/d) and the sector’s capacity utilization rate (88.7%) rose even as refineries resumed previously postponed maintenance.
• The U.S. was a petroleum net exporter of 3.0 Mb/d – the highest on record since 1947. Petroleum exports increased 1.0 million b/d in March m/m, adding a significant number of barrels to the global market.

Prolonged price weakness going into March continued to subdue U.S. onshore drilling activity, prompting a decline in the number of oil-directed rigs. The day-weighted average of active oil-directed rigs from Baker Hughes showed there were 12 fewer U.S. rigs operating in March compared to February. This is 22 fewer oil rigs operating compared to March 2022.

While producers continued to drill, there was no change in overall drilling activity in March compared to March 2022. The number of wells being drilled to completion stagnated, positioning producers to make use of the drilled but uncompleted inventories. For example, in the Bakken, though the region increased production over February by 21,000 b/d, drilling and completions m/m recorded no gains. In other cases, such as the Eagle Ford, production from new wells offset losses from legacy production in excess of 4,000 b/d.

Even so, U.S. oil production grew 77,000 b/d in March to 12.4 Mb/d, with total productivity gains across all basins – including the Permian and Anadarko – continuing to offset naturally declining production. This added about 700,000 b/d to production year on year (y/y) yet remains within 592,000 b/d of its all-time peak in November 2019. The importance of growing oil production is evident every day as it brings about economic incentives, improves America’s balance of trade and affords continued energy security at home.

Additionally, natural gas liquids production of 5.8 Mb/d in March reached its second-highest level for that month (after 2022) since 1973, but March production fell by 224,000 b/d m/m and by 107,000 b/d y/y responding to a decline in demand. This is the first and largest month-over-month decline for March since 2013. 

Considering all of this, as U.S. producers continued meeting domestic demand, the U.S. remained a petroleum net exporter of nearly 3.0 Mb/d, spurring job and economic growth at home while adding more barrels to the global market during a time of both economic and geopolitical uncertainty. This included Russia’s oil production cut of 500,000 b/d and OPEC’s subsequent announcement of a production cut of 1.1 Mb/d starting in May.

U.S. commercial crude inventories excluding Strategic Petroleum Reserves (SPR) fell 1.5% m/m, which was the first March decline in 20 years. But stocks remained above their five-year average and rose by 13.8% compared to March 2022 to 57.2 Mb/d. This showed a continued resiliency in U.S. petroleum supply – even as prices were driven lower. The decline in crude oil inventories came with a boost in the demand for oil exports of over 1 Mb/d (detailed below) and a rise in the volume of inputs into refineries of 3.4% (500,000 b/d) m/m and 2.7% y/y (400,000 b/d) to their second-highest level for the month since 2019, with a symmetrical increase in utilized capacity (88.7%).

Total petroleum demand for March was 32,000 b/d less than March 2022. Yet it represented a rebound from December and January of about 263,000 barrels per day. The month-over-month decrease in demand is mostly explained by reduced consumption of other oils (5.0 Mb/d) and residual fuel (0.3 Mb/d), which also contributed to – along with distillates (3.8 Mb/d) – the year-over-year declines in total petroleum for March.

With a slowdown in U.S. manufacturing and a spring seasonal decrease in heating demand, demand for other oils – intermediate products in refining and petrochemicals and heating – in March shed nearly 500,000 b/d compared to March 2022.  However, the product segment continued to make up more than 25% of U.S. petroleum demand.

The seasonal increase in motor gasoline demand (8.9 Mb/d), which is the largest component of total petroleum demand, increased by 2.9% m/m in March.  Within motor gasoline demand, deliveries of reformulated-type gasoline (used primarily in urban areas) fell by 3.2% m/m to 2.8 Mb/d but were offset by increases in conventional gasoline deliveries, which rose by 3.0% m/m to 5.9 Mb/d. Demand for distillates, which have been in the forefront of the petroleum products segment since Covid-19 and Russia’s full-scale invasion of Ukraine, rose to 3.8 Mb/d in March by 4.5% m/m but was down 7.7% y/y compared with March 2022 to their lowest for the month since 2013.

Refineries processed nearly 16.0 Mb/d, running at almost 90% of capacity. The throughput, measured by gross inputs into crude distillation units, rose by 3.4% m/m (524,000 b/d) but fell 2.4% y/y (400,000 b/d) continuing the y/y decline in refinery throughputs for a fourth consecutive month. A further decline had been expected in U.S. refinery activities in March on scheduled maintenance, which was repeatedly postponed through-out the pandemic and in response to elevated prices.

The overall growth of the industry’s general capacity is important because it has historically helped provide household energy affordability and energy security during times of economic uncertainty and financial distress for American families and businesses.

Please see the latest API MSR™ for details, product-level analysis, and data.