Despite weaker leading economic indicators in August, the American Petroleum Institute’s Monthly Statistical Report recorded remarkably strong US oil production, demand, and trade activities for the month.
US petroleum demand, as measured by total domestic petroleum deliveries, was 21.5 million b/d in August—the highest for any month since August 2005. This was an increase of 3.2% from July and an increase of 0.9% compared with August 2018. Year-to-date through August, total petroleum demand averaged 20.5 million b/d, its strongest level since 2007.
Consumer gasoline demand, measured by total motor gasoline deliveries, was 9.8 million b/d in August, representing an increase of 1.7% from July and 0.1% compared with August 2018. Year-to-date through August, gasoline demand decreased by 0.4% year-over-year.
In August, distillate deliveries of 3.9 million b/d increased by 1.1% from July but decreased by 5.8% compared with August 2018. Cumulatively through August, distillate deliveries have decreased 1.2% year-over-year, along with greater corroboration of a recession in the trucking industry.
Kerosene jet fuel demand reached a new record for any month at 1.9 million b/d in August. This was an increase of 3.1% from July and 1.5% compared with August 2018. The International Air Transport Association (IATA) reported North American revenue passenger kilometers increased 1.5% year-over-year in July (latest) and was the second among all regions.
Residual fuel oil demand was 358,000 b/d in August, which was an increase of 17.8% from July and 14.7% compared with August 2018. An acceleration in demand from marine shipping appears to have driven the increased demand. The Baltic Dry Shipping Index of ship charter rates increased by 27.3% in August and has nearly quadrupled since February, even as tariffs slowed global trade. Reports suggest that vessels entering the shipyards in order to install exhaust gas cleaning systems (scrubbers) in advance of more stringent sulfur fuel regulations that take effect on Jan. 1, 2020, explain the trend and may support pricing for the balance of the year.
US oil production
In August, the US recorded a new record 12.3 million b/d for crude oil production and sustained record natural gas liquids production of 4.8 million b/d for five consecutive months. The solid oil production came despite more than 4% less drilling activity in August.
Baker Hughes reported an average of 760 oil-targeted rigs in August, down from 782 in July. This is consistent with continued shale productivity increases reported in the US Energy Information Administration Drilling Productivity Report. Additionally, the production results were consistent with EIA reports that the number of drilled but uncompleted wells (DUC) declined to 8,108 in July from previously reported peaks above 8,500 wells.
International trade
US petroleum exports rebounded in August to 8.1 million b/d, which was an increase of more than 400,000 b/d above July and 1 million b/d above August 2018. Between July and August, crude oil and refined product exports increased by 180,000 b/d and 258,000 b/d, respectively.
At the same time, however, US petroleum imports returned above 10 million b/d in August, with increased in both crude oil and refined product imports. Overall, US petroleum net imports increased to 1.9 million b/d in August from 1.8 million b/d in July but were still 1.5 million b/d lower than they were in August 2018.
Refinery operations, inventories
In August, gross inputs to US refineries were 17.9 million b/d and implied a capacity utilization rate of 95.2%—both at their highest rates so far this year.
US total petroleum inventories were 1.31 billion bbl in August, including crude oil and refined products but excluding the Strategic Petroleum Reserve. Total inventories increased despite crude oil stocks falling to their lowest level to date this year. As refinery throughput and US crude oil exports increased in August, there was a draw down on crude oil stocks and subsequent rise in refined product and total inventories.
Macroeconomic indicators
However, US leading economic indicators highlight weaker industrial activity and consumer sentiment, according to API.
API’s Distillate Economic Indicator, which includes industry fundamentals, prices, and interest rates, had a reading of -0.1 in August and a 3-month average reading of -0.1, which historically has corresponded with slowing US industrial production.
The Institute for Supply Management’s Purchasing Managers Index signaled a contraction in industrial activity with a reading of 49.1 in August. New orders, production, and employment each decreased, while supplier deliveries slowed and indicators covering trade, supplier backlogs, inventories, and raw materials all weakened.
According to the US Bureau of Labor Statistics, labor markets remained near record-low unemployment. The unemployment rate remained steady at 3.7% as US nonfarm payrolls increased by 130,000 in August.