WTI Up on Inventory Data; Ignores Gasoline, Distillate Build
US gasoline production
US gasoline production fell from ~9.587 MMbpd (million barrels per day) in the week ended September 4 to 9.247 MMbpd in the week ended September 11. Gasoline production averaged 9.604 MMbpd over the four weeks ended September 11. That’s ~3.2% higher than the ~9.306 MMbpd average over the same period last year. Compared to the four weeks ended September 4, the four-week average supplies fell ~2.5%.
US gasoline demand
US gasoline demand fell from 9.017 MMbpd in the week ended September 4 to 8.983 MMbpd in the week ended September 11. Gasoline demand averaged 9.157 MMbpd over the four weeks ended September 11.
Compared to the four weeks ended September 4, the four-week average demand decreased ~1.92%. But it was ~2.02% higher than the 8.975 MMbpd over the same period last year.
What does this mean?
As we saw above, production of 9.247 MMbpd exceeded the demand of 8.983 MMbpd in the week ended September 11, despite both production and demand falling on a weekly basis. This difference led to an inventory build, as we saw in the previous part of this series. You should note that net trade flows also affect gasoline inventory levels.
US gasoline consumption forecasts
According to the EIA’s STEO (Short-Term Energy Outlook) report released on September 9, gasoline consumption will rise by 210,000 bpd (barrels per day), or 2.30%, in 2015 compared to 2014 levels.
According to the report, “The effects of employment growth and lower gasoline prices outweigh increases in vehicle fleet efficiency.” However, the STEO forecasts that consumption will remain flat in 2016 due to a long-term trend toward more efficient vehicles. This will offset the impact of sustained economic growth.
Increased long-term gasoline consumption would be bullish for gasoline prices in the long term. Assuming crude oil prices (USO) remain relatively subdued, this would be positive for refiners like Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero Energy (VLO). These companies account for ~9% of the Energy Select Sector SPDR ETF (XLE).
Increased consumption is also positive for midstream MLPs like MPLX (MPLX), Phillips 66 Partners (PSXP), and Valero Energy Partners (VLP) if their refining parents decide to increase gasoline production due to higher prices. The revenues of these MLPs are driven by the volumes they transport.
In the next part of this series, we’ll look at the latest trends in distillate inventories.
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