The US Energy Information Administration (EIA) expects the ongoing effects of the COVID-19 pandemic to significantly affect petroleum markets in the summer of 2021, the agency said in its 2021 summer fuels outlook. However, markets will be less affected than they were last summer, and COVID-19 impacts are expected to diminish through 2021 as a rising share of the population is vaccinated against the virus. More vaccinations combined with the US fiscal stimulus should support continuing economic recovery, which will drive petroleum demand growth.
EIA expects more US consumption of gasoline and distillate fuel than last summer, but less than the summer of 2019. In addition, EIA expects the highest gasoline prices since summer 2018.
However, even with the supportive factors, the forecast for both consumption and prices remains uncertain, EIA noted. In terms of consumption, behavioral patterns—notably those related to working from home and commuting—will significantly affect petroleum consumption levels even as vaccination rates continue to rise. Rising petroleum consumption will affect crude oil prices and refining margins. In addition, crude oil production restraint from OPEC and OPEC+ have contributed to rising oil prices in 2021, and the reduced production levels targeted by OPEC+ in the coming months will continue to be a key driver of oil prices.
Gasoline
According to EIA’s forecasts, the retail price of regular-grade gasoline in the US will average $2.78/gal during summer 2021, which is more than last summer’s average of $2.07/gal. Last summer had the lowest average summer retail price in nominal terms since 2004 due to the impacts of COVID-19.
EIA expects Brent will average $64/bbl this summer, which would be $28/bbl higher than last summer. Gasoline refining margins (the difference between the price of wholesale gasoline and Brent crude oil) will average 45¢/gal from April through September, which is higher than last summer’s average of 36¢/gal and the highest summer average since 2017.
According to EIA data, gasoline consumption increased through the first quarter of 2021, growing to an estimated 8.6 million b/d in March from 7.7 million b/d in January, an increase of 890,000 b/d. For comparison, consumption in 2019 during the same period increased 410,000 b/d. The stronger growth during this period in 2021 likely reflects not only seasonal growth but also growth related to the diminishing impacts of the COVID-19 pandemic on gasoline consumption.
During the summer of 2021, rising employment levels, more people receiving COVID-19 vaccinations in the US, regional easing of COVID-19 restrictions, and higher summer driving season demand will push gasoline consumption higher than during first-quarter 2021 and last summer.
EIA forecasts that 2021 summertime gasoline consumption will average almost 8.8 million b/d, a 1.0 million b/d (13%) increase from 2020 but a 0.7 million b/d (7%) decrease from summer 2019.
At the beginning of the summer driving season (Apr. 1), total US gasoline stocks were 228.2 million bbl, 32.6 million bbl less than a year ago and 15.8 million bbl less than the 5-year average for beginning-of-season stocks. This summer, EIA forecasts that the total gasoline stock draw will average 11,000 b/d. Total gasoline inventories will end the summer at 226.2 million bbl, nearly unchanged from last year’s end-of-summer level and 3.7 million bbl less than the 5-year average
Diesel fuel
EIA forecasts US consumption of distillate fuel, which includes diesel fuel and heating oil, will average 4.0 million b/d this summer, a 11% increase (400,000 b/d) from last summer’s consumption, which marked the least summer distillate consumption since 2009. However, forecast distillate consumption this summer would still be slightly lower than 2019 levels.
EIA forecasts that wholesale diesel fuel margins will average 38¢/gal in the US this summer, 13¢/gal higher than last summer’s level and 1¢/gal higher than the previous five-summer average. Diesel margins will be higher than in recent years because of the expected recovery in economic activity and continued trucking demand. In addition, lower refinery runs amid lower overall petroleum demand will support refining margins.
The combination of higher wholesale diesel prices resulting from increasing refining margins, increasing economic activity, and higher crude oil prices will drive US retail diesel prices higher this summer compared with last summer. EIA forecasts that retail diesel fuel prices to average $2.96/gal this summer, up from an average of $2.43/gal last summer and up from the recent 5-year summer average of $2.73/gal.
EIA estimates US distillate inventories started this summer at 143.0 million bbl. This level is up from the 126.7 million bbl recorded at the start of last summer and 2.7 million bbl higher than the 5-year summer start average. Distillate inventories in the US typically build during the summer to prepare for the winter heating season. This summer, EIA forecasts the build will average about 6,000 b/d, well below the 246,000 b/d build recorded last summer and also below the five-summer average build of 42,000 b/d. EIA expects distillate fuel stocks will end the summer at 144.0 million bbl, which is down from the 171.7 million bbl recorded at the end of last summer and down from the 5-year end-of-summer average of 147.8 million bbl.
