API: US petroleum markets remained solid in April

May 27, 2019
US petroleum markets turned in a solid overall performance in April, according to the latest Monthly Statistical Report from the American Petroleum Institute. Crude oil production sustained a record-tying 12.1 million b/d while total petroleum demand was the highest for the month since 2007 at more than 20 million b/d.

US petroleum markets turned in a solid overall performance in April, according to the latest Monthly Statistical Report from the American Petroleum Institute. Crude oil production sustained a record-tying 12.1 million b/d while total petroleum demand was the highest for the month since 2007 at more than 20 million b/d.

“America’s strong production and demand reflects strong consumer confidence. That combined with strong employment numbers is good news for the US economy. America’s energy revolution continues to be the backbone of this success, and all Americans continue to enjoy downward pressure on prices as a result,” said Dean Foreman, API chief economist.

Demand

Petroleum demand, as measured by total US petroleum deliveries, was 20.2 million b/d in April, which was down 2.2% from March, but up 1.2% compared with April 2018. This was an uptick in the pace of annual growth, which had fallen to 0.4% for March in last month’s report.

Cumulatively over the first 4 months of the year, demand increased 1.3%, or 225,000 b/d, compared with the same period a year ago.

Gasoline demand, measured by total motor gasoline deliveries, was 9.5 million b/d in April, an increase of 2.6% from March and 3.2% vs. April 2018. This growth ran counter to recent seasonality and led to the strongest ever US gasoline demand for the month of April.

Distillate deliveries of 3.8 million b/d decreased 10.9% from March and 7.7% from April 2018. Although seasonal monthly decreases between March and April are typical, this was the largest decrease for April since 1993 and ran counter to a strong first quarter of the year.

Cumulatively distillate demand through the first 4 months was 0.2% below that of the same period one year ago. Freight trucking activity appeared to slow in April as the Bureau of Labor Statistics’ Producer Price Index for freight trucking fell 0.6% from March and was down for the third consecutive month.

Kerosene jet fuel demand, at 1.7 million b/d in April, continued above the 5-year range. This represented growth of 0.5% from March and 6.5% from April 2018—the strongest annual growth for April since 2013. Although grounding of the Boeing 737 Max jet also may have contributed to lower jet fuel demand growth in March, it appears some airlines replaced these jets with ones that are less fuel efficient, API said.

Residual fuel oil demand was 241,000 b/d in April, an increase of 13.7% from March but a decrease of 41.1% vs. April 2018. The Baltic Dry Shipping Index, an index of ship charter rates, increased 13.6% between March and April and as of early May rebounded to its highest levels since January. However, the structural shift appears to have affected future contracted residual fuel oil demand with marine fuel sulfur regulations tightening at the beginning of 2020.

Supply, trade

In April, US tied its world-leading and record crude oil production of 12.1 million b/d as well as natural gas liquids production of 4.7 million b/d. Production remained flat with productivity offset by slower drilling activity over the past quarter. Baker Hughes reported an average of 848 oil-targeted rigs in this year’s first quarter, down from 878 oil-targeted rigs in fourth-quarter 2018.

Total US petroleum exports—crude oil and refined products—hit a record for the month of April at 7.8 million b/d. This was an increase of 0.5% from March and 0.6% vs. April 2018. However, these small percentage increases masked a notable decrease in crude oil exports to 2.5 million b/d in April from 2.8 million b/d in March and a high of 3 million b/d in February.

However, total petroleum imports were the dominant change in April with an increase of 12.1% (1.1 million b/d) from March. This included gasoline and distillate import increases of 13% and 69%, respectively, while jet fuel imports more than doubled. Consequently, with imports rising more than exports in April, the US petroleum trade balance nearly doubled to 2.4 million b/d of net imports from 1.3 million b/d in March.

Refining, inventories

In April, gross inputs to US refineries were 16.7 million b/d and an implied a capacity utilization rate of 88.8%. This capacity utilization rate remained at the lower bound of the 5-year range, due in part to refinery outages of more than 1.4 million b/d in April—about 600,000 b/d more than in April 2018, according to Bloomberg.

Another contributing factor may have been the decline of Venezuelan heavy oil imports to US which EIA estimates suggest fell to 150,000 b/d in April from more than 900,000 b/d in April 2017. Over the same 2-year period, Venezuela’s decline was partially offset by imports from Canada, which increased by nearly 600,000 b/d. However, this could leave some US refiners short of the heavy grade of oil needed to run their complex refinery units at full capacity.

In April, total petroleum inventories, including crude oil and refined products but excluding the Strategic Petroleum Reserve, were 1.25 billion bbl. This was a flat change from March but an increase of 4.5% over April 2018. Total inventories were nearly on par with the average of the 5-year range.

Crude oil inventories increased 3.3% from March and 7.7% vs. April 2018. With the accumulation in April, crude oil inventories stood 2.4% above the 5-year average. This was primarily due to a combination of the strong domestic crude oil production coupled with decreased crude oil exports.