(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON (Reuters) - U.S. refineries have cut the volume of crude processed so far this year, but stocks of gasoline and distillates remain ample, highlighting the slack demand for transportation fuels.
Fuel consumption has stalled, part of a worldwide slowdown in oil demand associated with the slackening of manufacturing and freight activity.
U.S. refineries have reduced crude input by an average of 247,000 barrels per day since the start of the year compared with the same period in 2018, according to data from the U.S. Energy Information Administration (EIA).
Year-to-date processing rates have fallen for the first time since 2011 and by the most since the recession of 2008/09 (“Weekly petroleum status report”, EIA, Aug 21).
Refinery crude consumption has fallen by around 56 million barrels so far compared with the same period in 2018 (tmsnrt.rs/2NvuABQ).
Refineries cut processing sharply during the regular maintenance season in March and April and have never made up the shortfall.
Processing has remained at or below prior-year rates throughout the summer driving season, normally the highest demand of the year.
Philadelphia Energy Solutions’ 335,000 bpd refinery on the East Coast has been shut since a fire and explosion on June 21, which may have contributed to the loss of crude processing.
But processing was already running below prior-year rates before the plant exploded and has been below 2018 rates for 13 out of the last 16 weeks since the start of May.
Refiners on the East Coast have cut processing by an average of almost 120,000 bpd so far this year (mostly due to the Philadelphia explosion).
But they have also reduced processing by 87,000 bpd in the Midwest, 15,000 bpd along the Gulf Coast and 45,000 bpd on the West Coast.
Despite the reduction in processing, there has been no shortage of either gasoline or distillate fuel oil, with gasoline stocks level with last year and distillates comfortably above it.
Fuel consumption is broadly unchanged compared with 2018, with the volume of gasoline supplied to domestic customers flat so far this year and distillate consumption down slightly.
Forward refining margins for gasoline and distillates delivered at the end of year do not provide refiners with any significant incentive to boost processing compared with normal seasonal patterns.
Fuel consumption is stuck in the doldrums and unlikely to accelerate much until the domestic and international economies improve.
- Global oil consumption stagnates, leaving prices under pressure (Reuters, July 23) [nL8N24O58M]
- Bulging fuel stocks put spotlight on slack oil consumption (Reuters, July 18) [nL8N24J4UW]
- U.S. diesel consumption hit by economic slowdown (Reuters, July 4) [nL8N2452GH]
- Oil market will tighten sharply when U.S. refineries return from maintenance (Reuters, May 3) [nL8N2452GH]
Editing by Jan Harvey