Last updateThu, 04 Jun 2020 6pm

U.S. Petroleum Consumption Lowest in Decades

U.S. consumption of petroleum products has fallen to its lowest level in decades because of measures that limit travel and because of the general economic slowdown induced by mitigation efforts for the coronavirus disease 2019 (COVID-19). The U.S. Energy Information Administration (EIA) estimates the decline in petroleum product demand by examining the changes in total product supplied, EIA’s proxy for consumption. As outlined in EIA’s Weekly Petroleum Status Report, published yesterday, total petroleum demand averaged 14.1 million barrels per day (b/d) in the week ending April 17, up slightly from 13.8 million b/d in the previous week—the lowest level in EIA’s weekly data series, which dates back to the early 1990s. The most recent value is 31% lower than the 2020 average from January through March 13, or before many of the travel restrictions began.

Chemical Industry Outlook Uncertain Due to COVID-19

The American Chemistry Council (ACC) released an abbreviated, interim update to its Chemical Industry Situation and Outlook. The update offers two scenarios intended to capture a range of potential trajectories for the global and U.S. economies and the chemical industry.

According to the update, U.S. chemical volumes are expected to fall 3.3% in 2020 before rising 5.2% in 2021. Basic chemical volumes will drop 2.9% in 2020 before rising 6.7% next year. Chemical shipments are expected to fall 10.0% in 2020 before rebounding by 7.8% in 2021. Anticipated declines reflect struggling end-use markets and export customers for U.S. chemistry products.

Partially offsetting weakness in U.S. chemical production is strengthening demand for chemistry used in the response to COVID-19. Among the many chemistry solutions used in the fight against the virus are synthetic materials for personal protective equipment (PPE), ingredients for cleaners and disinfectants, and plastics used in medical equipment such as ventilator machines and IV bags.

IEA: Expect Global Refining Throughput Decline

Refining throughput in 2020 is forecast to fall 7.6 million b/d year-over-year to 74.3 million b/d on sharply reduced demand for fuels, according to the International Energy Agency (IEA). Global refinery intake is expected to plummet by 16 million b/d y-o-y in the second quarter of 2020, with widespread run cuts and shutdowns in all regions. Although refinery runs are falling, product stocks are still expected to build by 6 million b/d. In the second half of 2020, refining activity will slowly recover as the global market moves into deficit.

Price of Oil Drops Below Zero for First Time Ever

At the close of trading on Monday, the price for West Texas Intermediate crude oil fell to minus $37.63 a barrel. “The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there’s no place to put the oil, no one wants a crude contract that is about to come due,” Bloomberg reports.

“The extreme move showed just how oversupplied the U.S. oil market has become with industrial and economic activity grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. An unprecedented output deal by OPEC and allied members a week ago to curb supply is proving too little too late in the face a one-third collapse in global demand.”

U.S. Shale Output Set to Drop in 2020

Due to the combined effect of the COVID-19 pandemic and the low oil prices, U.S. shale operators are reducing spending, production and overall activity in 2020. Although the country’s oil production was previously poised for annual growth of 8.1%, based solely on interpretation of operators’ guidance, Rystad Energy is projecting a decline of at least 2.7% year-on-year.

As shut-ins, reductions in spending and activities weigh in, the fourth quarter of 2020, which was projected to see a year-on-year oil production increase of 650,000 barrels per day, is now instead forecast to see a reduction of 1.5 million bpd. In other words, production for the quarter will be lower by some 2.15 million bpd compared to what was expected before the COVID-19 crisis. 

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