US Crude Oil Refinery Demand Rose Due to the Fall in Oil Prices



Crude oil refinery demand 

We discussed US crude oil production in the previous part of this series. Now let’s explore how refinery demand is driving the crude oil market. US crude oil refinery demand rose by 214,000 bpd (barrels per day) to 16.7 MMbpd (million barrels per day) for the week ending December 25, 2015. US refineries operated at 92.6% of their operable capacity for the same period. Refinery demand rose due to the return of refineries from seasonal maintenance.

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US crude oil refinery demand by region

The Gulf Coast region reported the highest crude oil refinery demand of 8.9 MMbpd for the week ending December 25. During the same period, the Midwest, the West Coast, and the East Coast had refinery demands of 3.7 MMbpd, 2.3 MMbpd, and 1.2 MMbpd, respectively.

The lower crude oil prices and the high crack spread have been driving crude oil refinery demand. US refineries like Phillips 66 (PSX), Tesoro (TSO), Alon USA Energy (ALJ), HollyFrontier (HFC), and Valero Energy (VLO) benefit from lower oil prices, as crude oil is the key input material for refineries. In contrast, lower oil prices negatively affect oil producers like Pioneer Natural Resources (PXD) and Anadarko Petroleum (APC).

We discussed US crude oil inventory in the second part of this series. Inventory rose due to the rise in US crude oil imports and the marginal rise in US production. The US refined products inventory rose due to the rise in refinery demand and lower refined products demand.

The EIA (U.S. Energy Information Administration) reported that the US gasoline inventory rose by 0.9 MMbbls to 221.4 MMbbls for the week ending December 25, 2015. Likewise, the US distillate inventory rose by 1.8 MMbbls to 153.1 MMbbls for the same period. Market surveys estimated that US gasoline and distillate inventories would rise by 0.9 MMbbls and 1 MMbbls, respectively, for the same period. The consensus of rising refined products inventory is also putting pressure on crude oil prices. In the next part of this series, we’ll see how US imports are influencing the crude oil market in the next part of this series.

The ups and down in the energy market affect ETFs like the iShares US Oil Equipment & Services ETF (IEZ), the Vanguard Energy ETF (VDE), and the First Trust Energy AlphaDEX Fund (FXN).


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