U.S. oil refiners, pipeline companies expect strong demand for rest of 2022

Gasoline prices are displayed at an Exxon gas station behind the U.S. flag in Edgewater, New Jersey, U.S., June 14, 2022. REUTERS/Mike Segar

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NEW YORK, Aug 9 (Reuters) – U.S. oil refiners and pipeline operators expect energy consumption to be strong in the second half of 2022, even as analysts and industry watchers fear that demand will not weaken if the global economy goes into recession or if fuel consumption is high. prices deter travellers.

The company’s outlook suggests a stronger view than recent data showing weak demand for fuel in the US, particularly gasoline, where consumption recently hit its lowest level since February, although we we are in the middle of the peak summer driving season.

U.S. gasoline product supplied over the past four weeks recently fell below 2020 levels for the same time of year when the U.S. was at the height of the pandemic.

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Energy companies including Energy Transfer LP (ET.N) and PBF Energy Inc (PBF.N) say energy demand will be strong in the second half of 2022, according to a Reuters review of corporate earnings calls.

“Management sees what’s happening on the ground, so any time they shout positivity when the demand data shows the opposite, we find it interesting,” said Kian Hidari, analyst at Tudor, Pickering, Holt and Co. “It’s still a strong environment for gasoline relative to historic levels.”

U.S. refiners are also benefiting from high transportation fuel exports to Latin America, and plants are expected to operate at high utilization rates to replenish inventories that were depleted when fuel supplies collapsed earlier. This year.

Exports of finished petroleum products from refiners were broadly in line with five-year seasonal averages at 3.02 million barrels per day (bpd) in May, the latest data available, according to the US Energy Information Administration. This was almost 65% higher than the pandemic low reached in May 2020.

U.S. oil production recovered to 12.1 million bpd, driving higher pipeline and terminal volumes for many midstream companies in the second quarter compared to a year ago . Energy Transfer posted a stronger-than-expected second-quarter performance and raised its outlook for the rest of the year, co-chief executive Thomas Long said.

Of the 16 midstream companies that reported earnings last week, more than half revised their forecasts upward, said James Mick, portfolio manager at Tortoise Capital Advisors.

Four-week average implied gasoline demand fell to just under 8.6 million barrels per day (bpd) in the week to July 29, the lowest since February, data from the EIA, although weekly numbers can be volatile.

“We are constructive on the outlook for transportation fuels, supported by low product inventories and healthy global demand,” HF Sinclair Corp chief executive Michael Jennings said Monday in a call with analysts.

Inflation is soaring this year, but with the unexpected acceleration in US job growth in July, economists are less worried about a looming recession. Read more

The only U.S. refiner to note a drop in demand in its earnings call was CVR Energy Inc (CVI.N), particularly in the midcontinent, which includes states such as Kansas and Oklahoma, said Hidari. The company said it has seen some demand destruction as consumers are hesitant to drive as retail gasoline prices soar to more than $4 a gallon.

Gasoline consumption in the United States has been declining in recent years, raising concerns about the health of the economy. Refiners and pipeline companies expect consumption to improve in the second half of 2022.
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Reporting by Stephanie Kelly, Laila Kearney and Laura Sanicola; additional reporting by Arathy Somasekhar; Editing by David Gregorio

Our standards: The Thomson Reuters Trust Principles.

Stephanie Kelly

Thomson Reuters

New York-based correspondent covering the US crude market and member of the energy team since 2018 covering oil and fuel markets as well as federal renewable fuels policy.

Laura Sanicola

Thomson Reuters

Oil and energy reports, including refineries, markets and renewable fuels. Previously worked at Euromoney Institutional Investor and CNN.

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