Yesterday’s US EIA data demonstrated once more the weakness in implied gasoline demand, which fell 6.2% YoY, although it did rise in absolute terms by a meagre 0.1mmbd WoW. In fact, the last time there was a YoY increase in gasoline demand was in early October 2011. The 52-week average gasoline demand is now -2.1% YoY (Figure 1).
Implied all product demand grew 1.3mmbd WoW to 19.2mmbd, the first 2012 reading over 18mmbd and now within the prior five-year range. However, the greatest contribution came from the volatile ‘other’ product category, which increased 0.5mmbd WoW.
Refinery utilisation fell 1.5% WoW, which was more than the 0.6% drop the market was expecting, although in line with typical seasonal refinery utilisation. The resulting 0.3mmbd fall in refinery throughput goes some way to bridging the gap between recorded inventory levels and market expectation. Total inventory remained flat (Figure 2), at a time of the year when, historically, inventory levels rise. This might reflect the industry’s attempts to manage inventory better in the face of weakening oil demand outlook than it did in 2011, we believe.
The Brent price is struggling to hold on to USD 110/bbl territory, despite noise around the Iran sanctions. Recent data (see, for example, our IEA January Report - Demand Forecast Cut, More Cuts to Come, of 19 January) indicate that the market might already have moved into an oversupply position and crude is unlikely to remain elevated unless OPEC production falls, we believe.
The US EIA data recorded a 3.6mmb build in crude inventory (vs. +1.5mmb expected), a 2.5mmb draw in distillate (vs. -0.1mmb expected) and a 0.4mmb draw in gasoline (vs. +2.0mmb expected).