U.S. oil refiners, pipeline companies expect strong demand for rest of 2022
By Stephanie Kelly, Laila Kearney and Laura Sanicola
NEW YORK (Reuters) – U.S. oil refiners and pipeline operators count on vitality consumption to be robust for the second half of 2022, despite the fact that analysts and trade watchers have frightened that demand might falter if the worldwide financial system enters a recession or excessive gas costs deter vacationers.
The corporate outlooks recommend a stronger view than current knowledge displaying weak point in U.S. gas demand, notably in gasoline, the place consumption lately hit its lowest degree since February despite the fact that that is the center of the height summer time driving season.
U.S. gasoline product equipped over the previous 4 weeks lately fell under 2020’s degree for a similar time of yr, when america was within the depths of the pandemic.
Vitality corporations together with Vitality Switch LP and PBF Vitality Inc say vitality demand might be robust within the second half of 2022, in accordance with a Reuters overview of firm earnings calls.
“Administration sees what is going on on on the bottom so any time they’re calling out positivity when demand knowledge has been displaying in any other case, we discover that fascinating,” stated Kian Hidari, an analyst at Tudor, Pickering, Holt and Co. “It is nonetheless a robust surroundings for gasoline in comparison with historic ranges.”
U.S. refiners are additionally benefiting from excessive exports of transportation fuels to Latin America, and vegetation are anticipated to run at excessive utilization charges to restock inventories that have been drawn down when gas provide cratered earlier this yr.
Refiner exports of completed petroleum merchandise have been largely in step with five-year seasonal averages at 3.02 million barrels per day (bpd) in Could, the most recent knowledge obtainable, in accordance with the U.S. Vitality Data Administration. That was practically 65% greater than the pandemic low reached in Could 2020.
U.S. oil output has recovered to 12.1 million bpd, serving to enhance pipeline and terminal volumes for a lot of midstream corporations for the second quarter from a yr in the past. Vitality Switch reported a stronger-than-expected second quarter efficiency and boosted its steering for the remainder of the yr, stated Co-Chief Government Thomas Lengthy.
Of the 16 midstream corporations that reported earnings final week, greater than half revised steering greater, stated James Mick, Portfolio Supervisor at Tortoise Capital Advisors.
The four-week common of implied demand for gasoline fell to simply below 8.6 million barrels per day (bpd) within the week to July 29, lowest since February, in accordance with EIA knowledge, although the weekly figures may be unstable.
“We’re constructive on the outlook for transportation fuels, supported by low product inventories and wholesome world demand,” HF Sinclair Corp Chief Government Michael Jennings stated on a name with analysts on Monday.
Inflation is hovering this yr, however with U.S. job progress unexpectedly accelerating in July, economists are much less frightened about an impending recession.
The one U.S. refiner to notice some demand tapering in its earnings name was CVR Vitality Inc, particularly within the mid-continent, which incorporates states corresponding to Kansas and Oklahoma, Hidari stated. The corporate stated it has seen some demand destruction as customers shrink back from driving due to retail gasoline costs which have reached over $4 per gallon.
(Reporting by Stephanie Kelly, Laila Kearney and Laura Sanicola; further reporting by Arathy Somasekhar; Enhancing by David Gregorio)
