Demand in the crude oil market has been gradually recovering, which is reflected in the surge in U.S. road transportation. Although gasoline prices have not yet risen significantly, U.S. refiners are gradually increasing production ahead of the summer driving season, which could boost refiners’ profits.
U.S. trucking market a boom as crude oil demand recovers
Previously, demand for other petroleum products was falling sharply during the initial phase of the new crown epidemic, so strong demand for diesel consumption was a lifesaver for the refining industry. Now a surge in gasoline use, a rebound in demand for jet fuel driven by a rebound in U.S. tourism, and the fact that consumer demand for diesel has been firm, all strongly argue for a rebound in oil industry demand.
Matthew Minster, Breakthrough’s chief economist, analyzed that the freight industry will peak in 2021, because although U.S. consumers have slowly begun to shift to the service industry, but the current level of demand for goods consumption seems to be maintained. Bloomberg survey shows that in the next six months, passenger traffic growth is expected to reach 71%, compared to the fourth quarter of 2020 will be improved by 50%.
It is worth noting, however, that U.S. diesel stocks are already running low. U.S. diesel stocks are roughly 142 million barrels, down from last summer’s level of nearly 180 million barrels.
IHS Markit’s head of U.S. oil industry analyst Debnil Chowdhury believes that while domestic demand for diesel is a bright spot, the level of diesel exports remains a concern. Most of the U.S. diesel was previously exported to European countries, but the slow introduction of vaccination in Europe now has limited economic recovery and demand for fuel.
Chowdhury also believes that another potential difficulty in reviving the oil industry is that crude oil production in Texas has not yet fully recovered. The industry uses pumps and drilling machines that require diesel fuel to burn to generate electricity.
However, later in the year, seasonal demand will increase in favor of higher levels of road transportation demand.
U.S. Refineries Are Scrambling to Increase Production
Refineries are also seizing the opportunity to increase production. U.S. gasoline supplies reached a seven-week high in the week ended April 16, with refinery capacity reaching 85%, the highest level since March 2020, but still below 90% for the same week in 2019 when refineries were storing gasoline for the onset of the summer driving season, government data showed.
At 22:30 tonight, U.S. EIA inventory data will be released, when you can focus on refinery inventory data changes.
Valero Energy Corp. told analysts during its first-quarter earnings call released on April 22 that.
“We are not at full maximum capacity as we remain very cautious about our supply chain.”
Refineries like ExxonMobil, Beaumont and Total SE Port Arthur on the Texas Gulf Coast are producing at full capacity for the first time in more than a year.
Total Port Arthur, Marathon Petroleum Corp., the Texas-based Galveston Bay Refinery and the Louisiana-based Phillips 66 Alliance (Phillips 66) (Alliance) in Louisiana have also been catching production, and these refineries have been working to get their FCC facilities restarted after shutdowns, or to keep them operating.
At some other refineries, such as BP’s Whiting plant in Indiana, other units such as its coke ovens have also failed. Still, if refiners don’t try to run out of oil, they risk missing opportunities for improved demand and higher profit margins.
Although it is unclear how much production refineries can achieve during the summer driving season. With more people getting vaccinated, returning to the office and planning long-delayed vacations, demand already looks stronger now than it did in 2020.
Energy Aspects says margins are still not close to the five-year average and predicts U.S. gasoline supplies won’t peak until December, while refineries should try to keep pace with demand expectations.
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