U.S. Gasoline Demand Plummets With Recovery Appearing Far Off
(Bloomberg) -- Demand for gasoline in the U.S. dropped to levels last seen in the early stages of the pandemic, suggesting consumption still faces a stumbling recovery.
Gasoline supplied, which the U.S. government uses as a proxy for demand, slid last week to the lowest level since May when many states were enforcing strict travel and dining restrictions to stem the spread of the coronavirus. Gasoline inventories grew to their highest level since August, according to weekly data from the Energy Information Administration.
About 10 months after lockdowns first shuttered much of the U.S., the virus continues to rage from one troubled hotspot to the next, requiring restrictions that have taken a toll on fuel demand. On Monday, 32 states reported seven-day case averages substantially rising when compared with the prior week. Consumption stands at more than 600,000 barrels a day below where it was during the same time last year.
“There is zero evidence that there is any pick-up in the market,” said Robert Campbell, head of oil products research at Energy Aspects Ltd. “It is clear that discretionary travel and a lot of commuting will not return until there is more of a vaccine deployment.” He says travel will remain weak for the foreseeable future, or at least the next couple of months.
If the steep drop in demand doesn’t reverse course soon, refiners may choose to shut or slow down output from gasoline-making fluid catalytic crackers (FCC) or extend the downtime of these units that are already shut for maintenance. This is especially true if gasoline supplies continue to rise and fill up available storage.
“The current pandemic has crushed mobility and the recent outbreak will make things worse,” said Bill O’Grady, executive vice president at Confluence Investment Management LLC. “Bottom line, for refiners, this is really a bleak situation.”
|Key Refinery Shutdowns and Restarts|
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