All eyes on US gasoline today; will demand exceed 9.2m bpd?

Fill her up son, unleaded; I need a full tank of gas where I’m headed,” former Police-front man, Sting, sang back in 1999 on his solo album: “Brand New Day”. This country-inspired song could be the anthem for what is coming around next week, as Monday 31 May is Memorial Day in the US; the day that kicks off “the US driving season”. The season runs for about three months from Memorial Day to Labor Day on 6 September, during which the Americans take to the road, and demand for motor gasoline reaches a seasonal peak.

On 26 May, the US department of Energy (EIA) releases its estimate for the week ending 21 May. Will last weeks’ sharp uptick in ‘gasoline supplied’ – a proxy for demand – go even higher? ‘Gasoline supplied’ climbed from 8.8m barrels per day (bpd) on 7 May to 9.224m bpd on 14 May (source: EIA); the highest number of barrels per day since 13 March 2020.

Closing the gap?

Daily Covid-19 cases in the US have declined from the early January peak when 300,000 people were infected, to slightly above 20,000 case on 25 May. In combination with the fast-tracked vaccine rollout, the road is paved for what could very well become a seasonal peak for motor gasoline demand like the ones we used to know.

“We know that the US consumers are loaded with cash, following several stimulus packages that have rapidly and considerably increased the disposable personal income.

We also know that a lot of the money has been spent on goods – but far from all of them,” says Peter Sand, BIMCO’s Chief Shipping Analyst.

“BIMCO expects a strong driving season, one that could exceed the 2019 level of gasoline supplied and prove that the recovery for motor gasoline is accomplished,” says Sand.

What about jet fuel demand?

On 25 May, the accumulated year-to-date US flight passengers so far in 2021, exceeded that of 2020, while remaining 47% below that of 2019. Primarily international flights are falling short. This means that levels of supplied jet fuel remain quite depressed, which tell us that the recovery of total oil demand is still waiting further down the road.

For the week ending 14 May, 1.19m bdp of jet fuel was supplied, according to the EIA, much lower that the pre-pandemic level of 1.77m bpd estimated for 10 May 2019.

Total oil products supplied on 15 May came in at a 4-week average of 19.2m bdp, 4.4% below the pre-pandemic level of 20.1m bdp on 10 May 2019, but sharply up from 16.1m bdp estimated mid-pandemic on 15 May 2020.

Read more about how international travel and the US driving season impacts the oil tanker shipping sector next week when BIMCO Shipping Market Overview & Outlook, June 2021 is released. Join us for the accompanying live streaming on 2 June 2021, 10am CET too, on BIMCO’s YouTube channel.

“Reaching pre-pandemic levels of US oil product demand requires a resumption of international air travels. Until that happens, freight rate volatility will predominantly come from market disruptions of any kind,” says Sand.

Source: BIMCO, By Peter Sand, Chief Shipping Analyst