U.S. Energy Markets Are Rebalancing, But Remain Fragile

According to the American Petroleum Institute’s (API) August 2020 Monthly Statistical Report and Q3 2020 Industry Outlook, the U.S. returned to being a net energy exporter in August despite disruptions from Hurricane Laura and ongoing uncertainty over the pandemic. Higher demand and less supply translated into lower crude oil inventories, further demonstrating the gradual rebalancing of the market.

“Although the market remains fragile, we saw substantive progress in August towards the rebalancing and normalizing of key indicators,” API chief economist Dean Forman said. “The U.S. return to net exporter status despite disruptions from Hurricane Laura is significant in that it shows a combination of resilience in international demand coupled with domestic refiners increasingly turning to domestic sweet crude despite, and in fact due to, the pandemic-driven recession.”

Some highlights from the August 2020 Monthly Statistical Report include: U.S. crude oil and natural gas liquids production both edged down in August as drilling activity fell to its lowest level since November 2001. However, drilling productivity rose to record highs in most producing basins.

U.S. petroleum demand rose to 18.3 MMbbld in August following further recovery in demand for motor transport fuels. Increased trucking activity associated with a rebound in business and industrial activity, as well as ongoing e-commerce, supported a 4.2% monthly uptick in diesel demand, while gasoline demand increased by 1.5% month over month. Jet fuel demand continued to be the main source of weakness with deliveries off more than 46% year over year due to depressed demand for air travel.
Total U.S. petroleum inventories (excluding SPR) increased 0.2% in August to 1.46 Bbbl. However, crude oil stocks fell 3.2% to 502.8 MMbbld, now 6.6% below the record in March 2017.

The U.S. returned to being a net energy exporter in August as imports of crude oil and refined products decreased 5.3% to 7.5 MMbbld and exports rose 2.0% to 7.8 MMbbld. Within the exports, 4.8 MMbbld was refined products, which increased by 1.9% month over month, and the remaining 3.0 MMbbld was crude oil that rose by 0.1 MMbbld month over month to a record for the month of August.

SOURCE: The Weekly Propane Newsletter, September 24, 2020. Weekly Propane Newsletter subscribers receive all the latest posted and spot prices from major terminals and refineries around the U.S. delivered to inboxes every week. Receive a center spread of posted prices with hundreds of postings updated each week, along with market analysis, insightful commentary, and much more not found elsewhere