MSR: Heading Into Peak Driving Season, Fuel Stocks are Below Five-Year Average

Faustine Jean-Louis
Posted May 18, 2023

As we near the start of the summer driving season, it is important to understand where U.S. supply has been relative to this periodic demand for fuels here at home and refined products America exports to the world.  

In the latest API Monthly Statistical Report (MSR™), with primary data through April, we see U.S. petroleum demand remained relatively strong at 19.8 million barrels per day (Mb/d),. This included a monthly net increase in transportation fuel consumption, yet continued weaknesses in distillate fuel and “other oils” consumption.

Production increased in all petroleum product supply segments month over month, and net refined product exports fell almost 50% from March. Motor gasoline and distillate fuel stocks were below their five-year average as they have been since the start of the year.

On the production side, rig count declined again in April, bringing the total loss to 52 rigs year to date on a day-weighted basis.

MSR™ highlights:

• U.S. petroleum demand contracted y/y for the fifth consecutive month. Still, month over month consumption of transportation fuel rose by 76,000 barrels, which was only partially offset by a decline in the consumption of “other oils.” This reflected an ongoing slowdown in the U.S. manufacturing sector.
• U.S. total supply of crude oil and natural gas liquids rose by 200,000 barrels per day (b/d) month on month (m/m) in April for a total of 18.4 Mb/d. Crude oil production is 261,000 barrels more than where it was in April 2019 and 742,000 barrels above its five-year average. Production in April (12.4 Mb/d) trailed the U.S. pre-COVID high of 13 Mb/d by about 600,000 barrels.
• Oil and natural gas-directed rig count for the month fell by 26 rigs after dropping 19 rigs in March, perhaps reflecting a slowdown in future production and demand balances.
• Though total inventories rose in April to their highest since August 2021, motor gasoline and diesel stocks fell below their five-year average. Inventory draws left motor gasoline 3% below its five-year minimum and distillate stocks only 4% above its five-year minimum.

Though the U.S. saw five consecutive months of year over year demand declines for diesel fuel, residual fuel and other oils – indicating a material slowdown in the manufacturing and freight markets – consumption of transportation fuel rose by 76,000 barrels, month over month.  U.S. petroleum demand in April was the strongest it has been since the pandemic, despite continuing signs of an economic slowdown.

In terms of crude oil prices, OPEC’s surprise announcement in April that it would cut oil production by 1.1 Mb/d starting in May – on top of a 500,000 barrel/day cut previously announced by Russia – had impact. U.S. oil rose to an average of $81.25 per barrel in the first two weeks of April before falling back to average $79.45 per barrel for the month.

This continued a prolonged price weakness going into April, which contributed to subdued U.S. onshore drilling activity that prompted a decline in the number of oil and natural gas-directed rigs. The decline in active rigs in April was only a fraction of the pullback at the peak of the pandemic, however.

The state of drilling and well-completion activity is linked to elevated costs for labor and materials, but it also reflects recessionary concerns and the potential for tighter capital markets that could impact investment decisions.  Upstream producers historically look for price stability before starting new projects. As Reuters reported, “after prices increase, it typically takes an average of five months for oil drilling to accelerate and another six months for wells to be fractured and completed, resulting in an overall lag of up to 12 months.”

In April, U.S. oil production increased just 2,000 b/d in April to 12.4 Mb/d. That was 742,000 b/d more than April 2022 and was the second-highest production level in the January-to-April time period since 1920 Additionally, natural gas liquids production of 6.0 Mb/d in April was 18.3% above its five-year average, adding almost 200,000 barrels m/m to production. 

Though total inventories increased on both a monthly and yearly basis as of April, motor gasoline and distillate stocks rested near the minimum of their five-year range. Motor gasoline stocks were 7.1% below their five-year average and were the lowest for the month since 2014. Distillate stocks were 14.4% below their five-year average and were at their lowest for the month since 2008.  

U.S. commercial crude inventories excluding Strategic Petroleum Reserves (SPR) fell 2.3% m/m and remained below their five-year average by 12.9%. They increased 9.9% y/y – making April the fifth consecutive month surpassing 2022 levels for the same period. The monthly decline in crude oil inventories came with a boost in the demand for oil inputs into refineries of 2.8% (440,000 b/d) m/m and 2.1% y/y (335,000 b/d) to their second highest for the month since 2019, with a symmetrical increase in utilized capacity (91%). To put this into perspective, roughly 77% of all months since January 2020 are below the current April level. This suggests that refinery inputs are relatively strong.

All of this should remind U.S. policymakers of the need for policies that support American oil and natural gas production, especially during periods of major economic and geopolitical uncertainty. American production helps protect U.S. families and businesses from global volatility in energy markets.

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