API: Modestly better US oil demand reflects general economy

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Oct. 15 -- US petroleum demand signaled a modest general economic improvement in September as deliveries for all products grew year-to-year, the American Petroleum Institute said in its latest monthly and quarterly statistical report. “The good news is that we’re moving toward economic recovery as reflected in petroleum demand, but we should not celebrate yet,” API Chief Economist John C. Felmy said.

Total product deliveries, which is how API measures demand, grew from comparable 2009 periods for the first 9 months and during the third quarter but continued below the same periods in 2007, he said during a teleconference with reporters. “We still see some areas which are relatively weak, particularly gasoline,” he said.

API said motor gasoline deliveries during the May-August summer driving season reversed their decline during the 2009 period, but grew an anemic 0.1% year-to-year to an average 8.92 million b/d in September. Its 9-month gasoline demand total, an average 9 million b/d, was 0.1% lower year-to-year.

Total US product demand rose 1.8% year-to-year in September to an average 18.93 million b/d, 1.9% during the third quarter to 19.08 million b/d, and 1.3% in the first 9 months to 18.97 million b/d, according to API.

“The other good news is that we’ve been able to keep the refinery system running at a high level,” Felmy said. “Yields are up, with record production of gasoline in September.” US refineries produced an average 9.04 million b/d of gasoline last month, 1.7% more than a year earlier, API’s statistics showed. They also indicated that distillate output climbed 2.7% to 4.21 million b/d from September 2009, while kerosene jet fuel production jumped 14.3% to nearly 1.6 million b/d year-to-year.

Product trends
Distillate production’s strength in September contrasted with a 3.6% decline during the first 9 months to an average 3.97 million b/d. Jet fuel production grew 2.8% to nearly 1.44 million b/d during the same period. US refiners produced nearly 15.1 million b/d of gasoline, 2.3% more than in 2009’s first 3 quarters, API’s statistical report said. The 14.84 million b/d of inputs to crude distillation units last month were down from August and from September 2010, but product output grew for everything but residual fuel oil, it added.

US oil production, meanwhile, reached an average 5.5 million b/d in September, 0.8% less than a year earlier, according to API. It said that the 4.87 million b/d total for the Lower 48 states was relatively steady compared with recent months and 1.5% more than September 2009’s total, while Alaska’s 636,000 b/d average rebounded from recent summer lows but came in 2.5% lower year-to-year. US crude production during the third quarter averaged 5.24 million b/d, down 0.6% from the same 3-month period in 2009.

Felmy said continued US production strength reflects growing Bakken shale development. “There’s no question that this is one of the most exciting areas. The latest data show that North Dakota hit a record in terms of rigs running this year, which surpassed the previous record in the early 1980s,” he said. “The technology has allowed us to develop resources which weren’t accessible previously, not only for crude oil but also for natural gas, where leasing is continuing to move forward despite relatively low prices.”

He suggested that US production growth may be affecting imports, which fell 7% year-to-year in September to an average 10.9 million b/d and 0.7% in the first 9 months to 11.83 million b/d. The decline from 2009 was stronger for products, which plunged 23% to 1.93 million b/d in September and 11.9% to 2.46 million b/d in the first 9 months, than for crude oil, which fell 2.7% to 8.97 million b/d in September but rose 2.8% to 9.37 million b/d in the first 9 months.

“The numbers were very, very low last year. We have seen a mixed picture,” Felmy said. “Crude oil imports were up year-to-date, but product imports were down sharply. It may be a function of refinery operators deciding to run more domestic crude and import fewer products.”

Contact Nick Snow at nicks@pennwell.com.

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