Nick Snow
OGJ Washington Editor
WASHINGTON, DC, July 16 -- US petroleum product demand plunged to its lowest first-half level in more than a decade as the sluggish economy continued to squeeze oil consumption, reported the American Petroleum Institute.
Total product deliveries (how API measures demand) averaged 18.75 million b/d during this year’s first 6 months, 5.8% below the comparable 2008 period’s 19.9 million b/d and nearly 10% below the peak of 20.75 million b/d in first half 2005, API said as it released its latest monthly, quarterly, and 6-month statistics.
“It clearly shows declines in demand, greater for some products than for the average. It reflects an economy that clearly is struggling right now. Demand is down, even though prices are significantly lower than they were a year ago,” API Chief Economist John C. Felmy told reporters during a teleconference.
Felmy said diesel fuel demand provides the most direct correlation with the sluggish economy, and could portend a decline in US gross domestic product for the first half when the US Department of Labor releases those figures in a few more weeks.
Deliveries of ultralow-sulfur diesel in the first half dropped 9.2% to an average 2.93 million b/d in 2009 from 3.22 million b/d in 2008, API’s statistics showed. Low-sulfur diesel deliveries averaged 3.24 million b/d in this year’s first half, 6.6% less than the same 2008 period’s average 3.47 million b/d.
Lowest since 2003
Gasoline demand fell at a lower rate, but was down nevertheless to its lowest first-half level since 2003, API officials said. “Consumers’ incomes have declined, but not as drastically as the general economy,” observed API Statistics Manager Ronald Planting. Gasoline deliveries in 2008’s first half averaged 8.95 million b/d, 0.9% less than 9.04 million b/d in 2009’s first 6 months, API reported.
API also showed that first-half US jet fuel demand plunged 12.8% year-to-year to 1.38 million b/d in 2009 from 1.59 million b/d in 2008, while residual fuel oil deliveries dropped 9.1% to an average 587,000 b/d from 646,000 b/d during the same period. Planting said that the lower resid demand reflected reduced industrial activity, “although one has to be careful here because of resid’s relationship to natural gas prices, which are depressed.”
US crude oil and condensate production, meanwhile, grew 3.4% to an average 5.29 million b/d in 2009’s first half from 5.12 million b/d during the comparable period a year earlier, according to API. “New fields came on line offshore in the Gulf of Mexico and onshore in the Bakken shale of North Dakota,” Felmy said. Production grew despite a more than 12% drop in Alaska during June related to maintenance of the Trans-Alaska Pipeline System, API noted.
It said domestic crude inventories as of June 30 were 348.7 million bbl, 17.9% more than the 295.8 million bbl a year earlier. “We’re definitely above the 5-year average of about 322 million bbl,” Felmy said.
Product inventories also increased year-to-year, with gasoline 0.6% higher at 212.1 million bbl, jet fuel up 8.7% to 43.3 million bbl, ULSD 27.2% higher at 94 million bbl, and low-sulfur diesel up 22% to 114.3 million bbl, the statistics showed.
Refining results
API also indicated that oil runs at US refineries during the first half fell 3.9% year-to-year to an average 14.3 million b/d in 2009 from 14.9 million b/d in 2008, while input to crude distillation units declined 4.2% to 14.6 million b/d from 15.2 million b/d. Operable capacity grew 0.4% year-to-year to an average 17.7 million b/d from 17.6 million b/d.
API noted that while US refining capacity utilization in the first half was down year-to-year to 82.4% from 86.4%, it was still above the average for all domestic industries, which the Federal Reserve Board put at 64.7% during June. “If you look at the yields for gasoline and distillate, they’ve both been up sharply,” Felmy said.
“The refinery capacity situation is very challenging because of more efficient vehicles, requirements to use more ethanol, and imports. But there are other, equally challenging policy issues, including a whole host of tax issues and how the Waxman-Markey bill handles domestic refiners, which would put them at a competitive disadvantage to foreign refiners,” he continued. “A lot of the discussions we’ve heard this year are that the moves would reduce crude oil imports, but they could increase product imports.”
Higher distillate inventories reflect some refiners’ shift of capacity toward more diesel, Felmy suggested. “You’ve also got refinery upgrades to handle Canadian oil sands. There are a lot of moving parts in the equation. A couple of capacity expansion projects are going forward. Others are still being considered,” he said.
Contact Nick Snow at [email protected].
