Spring is busting out all over and so is gasoline demand. Low gas prices are causing a buying frenzy at the pump as gasoline demand in the month of March hit an all-time record high. According to the American Petroleum Institute (API) the lowest average price for regular unleaded gasoline in 12 years has Americans guzzling gas like never before. The API say that U.S. drivers are consuming 9.25 million barrels a day breaking the previous March record from 2008. Currently U.S. gas demand is about 4% higher than it was a year ago causing refiners to run at near record refining rates, burning through over 16 million barrels a day of crude, unheard of for this time of year.
But it is not just gasoline demand, it is oil demand all-over. Not just here in the United States but also in China. China reported that crude-oil imports in March were up a whopping 21.6% from last year coming in close to 7.7 million barrels a day. This is down slightly from February‘s record of over 8 million barrels a day but it shows that China’s demand for imported oil is stronger than it has ever been. Now some of the buying has gone into filling China’s massive oil reserves but Chinese refineries have been active buyers as China’s gasoline demand has also been on a tear.
In India the International Energy Agency (IEA) just recently predicted “the strongest ever volume increase in Indian demand. The revised oil demand data for late 2015 and early data for 2016 higher and said that year-on-year oil demand growth will rise by impressive 8 percent. The IEA said that 2016 as a whole, India will see growth of around 300,000 barrels per day.
This comes as global oil production is peaking. The International Energy Agency yesterday predicted that non-OPEC oil production would fall by the most in 25 years. In the U.S. oil production has fallen to under 8.99 million barrels of crude a day in March which was down 6.8 percent from a year earlier. And while OPEC production in March was up about 40,000 barrels per day (bpd) to 32.38 million bpd in March, driven by sanctions-free Iran, I doubt that production increases by the cash starved cartel is going to make up for falling non-OPEC output. On top of that historic cutbacks in the energy private sector will make it hard to meet growing demand in the coming years.
Overnight there is talk that the OPEC/non-OPEC production freeze talks are back on and that could boost sentiment. U.S. rig counts will be watched closely. Last week the U.S. oil rig count fell by 3 to 351, the lowest level since 2009. If this is not the bottom of a historic bust cycle, then no one knows what one looks like.
Falling gas rigs will impact natural gas this summer! Andrew Weissman of EBW Analytics Group pointed out that May natural gas closed above critical resistance at $2.04 on Tuesday, facilitating a technical path for further gains in coming trading sessions The gas rig count was unchanged at 89 and the combined tally dropped to 440, a new low.
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NMEX
futures for 2H16 rose even faster than the front-month contract,
helping spur the January, 2017 contract to break longstanding
resistance at $3.00/MMBtu for the first time since November. Falling
weather-driven demand and projections for a rising storage surplus vs.
both year-ago and five-year average storage levels threatens to derail
the upward momentum. In this week’s natural gas section, we break
down the numbers on how April power sector consumption of natural gas
has overcome rising renewable and nuclear generation to increase
year-over-year despite flat electricity demand.Retiring coal plants
opting to generate electricity rather than pay to ship coal off-site
may be reducing power sector natural gas demand by 0.9-1.0 Bcf/d.
according to Weissman.
// ]]>