Each Wednesday petroleum markets wait breathlessly for inventory data from the Energy Information Adminstration, and depending on the estimates from the EIA prices will move sharply in one direction or the other.
These weekly data are estimates, as the EIA freely admits, from a sampling of the reams of information submitted by refiners, trading companies, majors, terminal operators, etc.
A couple months later the EIA comes out with monthly data, which often have sharply different results than what was seen in the initial data. The montly report has much less direct impact on the market, given the backward-looking nature (February data were released April 28), but can better inform historical comparisons.
The latest monthly figures show that product supplied -- demand -- was much lower in February than had been reported in the weekly demand estimates.
--Finished gasoline demand was 8.842 million b/d, from 9.068 million b/d in the weeklies.
--Distillate demand was 4.251 million b/d, from 4.385 million b/d.
--Residual fuel demand was 552,000 b/d, from 617,000 b/d.
--Overall product supplied was 19.782 million b/d, from 20.538 million b/d.
On a year-over-year basis, the initial estimate of 20.538 million b/d was down 3.45% from a year ago, with finished gasoline actually appearing up 0.47%. But the revised figures show overall demand down nearly 7% year-over-year, with finished gasoline down 2%.
On the surface, that makes sense, considering the slowing economy and surging prices, which should combine to cut demand. But a closer look shows that while product supplied through the US distribution chain was not as large as had been previously estimated, global demand has taken the slack.
Exports of crude and petroleum products, including unfinished oils and blending components, soared to 2.072 million b/d in February, the highest monthly total since the EIA began recording exports in 1973, and far above the next highest monthly average of 1.626 million b/d back in November 2007.
Distillate exports rose above 400,000 b/d for the first time, as did residual fuel exports. At 402,000 b/d, distillate exports far outpaced the previous high of 335,000 b/d set in January, as surging global diesel prices made foreign destinations more appealing than domestic markets for US refiners. Petroleum coke also recorded a record high of 615,000 b/d, up from an average of 366,000 b/d in 2007.
How does this impact US product demand?
Demand is an implied figure, calculated from direct observation of production, imports, exports, and stock change. Production and imports are added, exports are subtracted. A stock build is subtracted, while a stock draw is added.
In the weekly reports, the EIA uses an estimate of exports based on historical seasonal averages. With distillate exports doubling from February 2007 to February 2008, the estimated export level used by the EIA was far below actual exports, resulting in a large overstatement of implied demand.
So if US demand is down, prices should fall, right? Wrong. It just means that the US may become less of a price maker, and more of a price taker, as global demand outstrips that in the US.
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