8 charts on US oil crucial to investing in crude tankers

Part 4
8 charts on US oil crucial to investing in crude tankers (Part 4 of 9)

Why reversing US oil consumption trends in 2013 benefited tankers

U.S. oil consumption

U.S. oil consumption is another key driver of crude tanker business. Higher domestic consumption often has a positive impact on imported oil and crude tanker demand. But when domestic consumption is falling, it could negatively affect tankers like Frontline Ltd. (FRO), Nordic American Tanker Ltd. (NAT), Tsakos Energy Navigation Ltd. (TNP), and Teekay Tankers Ltd. (TNK).

US Crude Oil and Liquid Fuel ConsumptionEnlarge Graph

Reversal of historical trends

While U.S. oil consumption did increase in 2009 and 2010 as a world-scale economic recovery took place, it has come down since. There are three main factors that have contributed to the weak labor market, increase in fuel economy, and cheaper substitute energies: slow recovery, fuel economy, and cheaper substitute energies.

But oil consumption has improved this year on the back of improving economic activity, thanks in part to the central bank’s quantitative easing program. U.S. consumers used approximately 18.7 million barrels a day of crude oil and liquid fuel at the beginning of 2013, according to the DOE. That figure has risen to as high as 19.1 million in September. Consumption figures have fallen slightly since then but remain above where they were in the past.

US Oil Product SuppliedEnlarge Graph

Widespread increase in use

Higher demand for oil has been more widespread, suggesting macro forces in play. According to the latest weekly data from the Department of Energy, year-to-date average barrels of oil product supplied have been higher for motor gasoline, kerosene-type jet fuel, distillate fuel, and propane and propylene. Distillate fuel, propane, and propylene saw the largest increase, rising more than 3.0% for each category. The only category that saw a decline was residual fuel, which is used in “steam-powered vessels in government service and power plants, production of electric power, space heating, vessel bunkering and other industrial purposes,” according to the DOE.

In December, the IEA boosted its global oil demand forecast on the U.S. recovery and Eurozone recovery. But then again, economic prospects can change quite fast. At the start of last year (2013), everyone was still worried about the Eurozone and U.S. economy.

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