U.S. Gasoline Demand Is at Pre-Pandemic Levels. Don’t Cheer Yet

(Bloomberg) -- U.S. gasoline demand recovered to where it was before the pandemic closed much of the country, but it’s still well-below where it usually is in height of the summer driving season.

Stockpiles of the fuel declined by the most since mid-March last week, a bullish indicator for the oil market that has been hit by the coronavirus-driven demand collapse. But that comes with a caveat: Refineries are still running at just over 3/4 of their normal utilization rate, when typically they operate at nearly full capacity in the peak of the summer driving season.

Gasoline supplied on a four-week average basis, an indicator of demand, has marched up steadily every week since May 1. Still, it remains well-below the five-year average for this time of year.

It would be premature to suggest the oil industry is back to health, said Robert Yawger, director of the futures division at Mizuho Securities. “With gasoline, sure we had one of the biggest draws of 2020 last week, but these are all baby steps,” he said in a telephone interview. “Refinery utilization is still just at 77%. We still have a long way to go.”

One of the main problems is that refiners trying to keep up with gasoline demand must produce diesel in the process, which has inflated distillate supplies.. Last week diesel supplied to the market was at a 10-year seasonal low.

“The refiners still have a lot to figure out,” Yawger said.

©2020 Bloomberg L.P.