Yesterday’s EIA report saw implied distillate demand drop 0.6mmb/d WoW, taking demand to 3.2mmb/d, down 14.7% YoY. This was the fourth lowest reading in a decade and it dragged the 52-week average YoY demand just into negative territory.
With implied gasoline demand languishing at 8.4mmb/d, down 7.7% YoY, and other product categories reversing the prior week’s gains, all product implied demand was a lowly 17.7mmb/d (-8.5% YoY, Figure 2). This was the second lowest all product demand reading since 2000. On a 52-week average basis, all product demand is down 2.8% YoY. On a YTD basis, all product demand is down 1.1mmb/d YoY, substantially higher than the 0.1mmb/d decline in demand currently forecasted by the EIA, IEA and OPEC for 2012. That clearly highlights the downside risk to global demand estimates from the current weakness in US demand. On road fuel prices continue to increase, with gasoline edging closer to the USD 4.00/ US gallon mark and diesel now higher than its 2011 peak.
Crude imports fell 0.5mmb/d WoW (-5.6%), likely due to disruption around key Gulf Coast waterways caused by fog. In our view, the bullish 1.2mmbbl draw in crude inventory, which ran counter to market expectations of a 2.2mmbbl build, can be attributed to that fall in imports.
This week’s EIA report continues to suggest that the performance of US demand is likely to weigh on any expectation that global demand forecast risk is to the upside. We believe the oil price risk is to the downside.
The US EIA data recorded a 1.2mmbbl draw in crude inventory (vs. +2.2mmbbl expected), a 1.7mmbbl build in distillate (vs. -1.5mmbbl expected) and a 1.2mmbbl draw in gasoline (vs. -2.0mmbbl expected).