API: US oil demand showed signs of recovery late in 2009

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Jan. 15 -- US oil demand fell during 2009 but began to recover as the year concluded, the American Petroleum Institute said. Gasoline, kerosene, and all other oils were strongest, but distillate fuel oil lagged, especially for on-highway uses, API’s yearend 2009 and December statistics showed.

“Clearly, petroleum demand is mirroring the economic recovery,” said John C. Felmy, API chief economist, on Jan. 15. “We are seeing December demand figures stronger than fourth-quarter figures and fourth-quarter figures stronger than full-year figures. But the data also indicate that the recovery still has a distance to go, particularly if you look at ultralow-sulfur diesel fuel.”

API’s domestic supply and demand figures for 2009 were similar to the US Energy Information Administration’s global assessment 3 days earlier in its latest short-term energy outlook (OGJ Online, Jan. 13, 2009). It also showed a full-year drop in demand with a recovery gathering momentum as the year wound down.

Total US petroleum product deliveries, which API uses to measure demand, dropped 4% during 2009 to an average 18.7 million b/d from 19.5 million b/d in 2008. Deliveries during December rose 0.6% to an average 19.3 million b/d from December 2008’s average 19.1 million b/d, the report said.

“We’re seeing a firmer economy,” Felmy told reporters during a teleconference. “Individual consumers feel a little more confident, which can lead to improvements in retail sales. That can affect gasoline demand from improved employment. Economic growth can lead to more travel, which can increase jet fuel demand. Resid fuel demand can be affected by industrial, electric utility, and shipping uses. There may not be as tight a link with diesel.”

Distillate declines
In its statistical summary, API said distillate production and inventory levels declined in December as US manufacturing continued to grow for a fifth consecutive month as reported by the Institute of Supply Management. Domestic distillate inventories at the end of December totaled 162.6 million bbl, 3.3% less than the revised figure of 168.2 million bbl on Nov. 30 but 11.4% more than the 146 million bbl level at the end of 2008. Production during December averaged 3.8 million b/d, 0.5% less than a year earlier, while 2009’s full-year average of 3.6 million b/d was 7.9% less than 2008’s 3.9 million b/d.

Inventories of ultralow-sulfur distillate (ULSD), the type used in highway transportation, continued to build to multiyear highs, API continued. Its statistics showed that ULSD stocks finished 2009 at 117.4 million bbl, 1% more than their 116.2 million bbl level on Nov. 30 and 21.6% higher than their yearend 2008 level of 104.7 million bbl.

Refiners responded by reducing ULSD production by 3% year-to-year to an average 3.1 million b/d in December and by 3.2% to an average 3.2 million b/d for all of 2009. Felmy said that the pattern is consistent with what happened earlier when diesel fuel demand began to drop months after the recession began.

Domestic demand for other products began to recover late in 2009, however. Gasoline led the rebound with year-to-year increases of 2.3% in December to an average 9.1 million b/d and 0.3% for the full year to 9 million b/d. Jet kerosene deliveries soared 11% year-to-year during December to an average 1.5 million b/d in contrast a full-year 7.9% drop to 1.4 million b/d, according to API’s statistics.

US oil and condensate production grew during 2009 by 7% to an average 5.3 million b/d from 2008’s 5 million b/d level, API reported. Production during December averaged 5.5 million b/d, 8.6% more than the 5.1 million b/d average a year earlier. “There weren’t hurricane impacts in 2009 as there were in previous years,” said Felmy. “We also have new resources coming on that are very exciting, particularly deep offshore and in North Dakota’s Bakken shale formation. The industry isn’t finished producing oil in this country just yet.”

Contact Nick Snow at nicks@pennwell.com.

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