EIA Reports Low Demand, Refinery Utilization

Oil prices climbed to yet another high yesterday as the broader financial market moved higher. The Fed assured the market that low interest rates would continue, alleviating concerns of inflation and lower prices. Jobless claims also fell, providing comfort that the US economy remains on the right track. As phrases like “double-dip recession” and “bubble” become more prominent, some fear that sentiment will create a self-fulfilling prophecy that ends the rally and sends financial markets lower. Of course, the commodity “super cycle” theory discussed recently would contradict that fear, at least for commodities.

The EIA released their weekly oil market data yesterday, providing insights on what happened to markets during the winter storm that plagued the Eastern US. The inventory report was fairly benign – although diesel stocks dropped sharply, gasoline held steady and crude posted a surprise build. Refinery utilization plummeted from over 80% to 68.6% – the lowest since pandemic-lows. Total crude processed in the Gulf Coast fell to the lowest level since Hurricane Harvey caused multi-week refinery shutdowns, and national refining was the lowest since the ’08 financial crash and Hurricanes Gustav and Ike.

Deeper inventory draws were averted by deep drops in fuel demand. Diesel demand fell by half a million barrels per day (MMbpd), while gasoline fell by a much larger 1.2 MMbpd. Diesel demand fell as trucks were pulled off the road, but cold weather and power outages also caused increased generator usage. Gasoline received no counteracting forces, experiencing the full brunt of the winter storm. OPIS also points out that personnel missing work in Texas might have impacted survey data, meaning real demand may be even lower than reported.

This morning, prices are giving up some of yesterday’s gains. Crude oil is trading at $62.98, down 24 cents from Wednesday’s closing price. Fuel prices are also moving lower, with diesel trading at $1.8948 (down 1.4 cents) and gasoline at $1.8747 (down 2.1 cents).