Who said it was refiner maintenance season? It sure does not feel like it. Once again U.S. refiners defied expectations raising runs a full percentage point to a summer-like 91.4%, according to the Energy Information Administration (EIA). The refining madness put U.S. crude oil refinery inputs at 16.4 million barrels per day which played a large part in the market getting a shock with a whopping 4.9-million-barrel crude oil draw. It isn’t July yet, is it?
This came as refiners upped gasoline production to meet what has been strong demand. The EIA put the four-week moving average for gasoline demand a 9.4 million barrels per day, up by 4.2% from a year ago. But it is not only the demand for regular gas that is catching the market’s attention but the demand for premium. In a new report, the EIA points out that since 2013 the share of premium gasoline in total motor gasoline sales has steadily increased to 11.3% in August and September 2015, the highest share in more than a decade.
Although lower gasoline prices may be supporting demand for premium gasoline, the upward trend in sales is more likely driven by changes in fuel requirements for light-duty vehicles (LDV) in response to increasing fuel economy standards, which will have widespread implications for future gasoline markets according to EIA. Automakers have moved to hybrids and turbochargers to meet these numbers, thereby creating more engines that demand premium gas.
Overall refiners are pushing out a lot of gas exceeding what it has been doing in distillate. Refiners supplied an average of 19.5 million barrels per day of product, up by 1.5% from the same period last year. Despite gasoline production averaging 9.4 million barrels per day, up by 4.2% from the same period last year, distillate fuel product is at 3.7 million barrels per day down by 6.8% from the same period last year and jet fuel product supply is down 3.1% compared to the same four-week period last year.U.S. oil production also fell to 9.008 million barrels a day last week. That puts U.S. output down 700,000 barrels a day from the peak and that is a number that will keep on falling.
We will also see natural gas production start to fall as well. Terry Etam at the BOE points out that it is unlikely that the U.S. can maintain natural gas production levels. Terry points out that, “the U.S. currently produces about 80 billion cubic feet per day (bcf/d). Shale gas is estimated at about half of U.S. production, or 40 bcf/d (and probably more now as that statistic is a few years old). There are currently 90 rigs looking for gas in the U.S., which is the lowest since I have no idea when, but Baker Hughes’ rig count shows it being the lowest number by far since at least 1987. In 2013 and 2014 there were an average of over 350 rigs drilling for gas, most of which were chasing highly prolific shale gas plays. During this period, U.S. natural gas production rose by 4.5 bcf/d per year.