U.S. petroleum stocks surge as coronavirus stops consumption

U.S. gasoline consumption fell to its slowest rate for more than a quarter of a century last week as epidemic controls brought much of the economy and transportation system to a sudden stop.

Estimates for the volume of gasoline and other petroleum products supplied to the domestic market, published on Wednesday, provide the first clue to the epidemic’s impact on the oil market.

Gasoline supplied fell to 6.66 million barrels per day (bpd), down from 9.70 million bpd two weeks earlier, and the slowest rate since 1994, data from the U.S. Energy Information Administration (EIA) showed.

Gasoline supplied, a proxy for the amount consumed by motorists, is very volatile from one week to the next, which is why the EIA recommends focusing on the four-week running average.

But the decline in gasoline supplied over the last two weeks is unequalled in the three decades since the EIA started estimating this series, and is almost certainly unequalled in the history of the oil industry.

The two-week decline in the volume of gasoline supplied between March 13 and March 27 was equivalent to more than eight times the typical change over a similar period (reut.rs/3dRTczQ).

Gasoline was the hardest hit of the main petroleum products in the United States, but there was also a substantial decline in the volume of jet fuel supplied and smaller declines in some other products including diesel.

The total volume of petroleum products supplied decreased by 3.6 million bpd over the two-week period, the largest drop for more than 30 years, and equivalent to more than 4 standard deviations.

STOCKS SURGE

The collapse in fuel consumption is causing petroleum stocks to build all along the supply chain, with large increases in both crude and products being stored at refineries and tank farms around the country.

Total U.S. stocks of crude and petroleum products, excluding the government’s strategic petroleum reserve, jumped by 21 million barrels last week (“Weekly petroleum status report”, EIA, April 1).

It was the third-largest increase in the last 30 years, a rise that has been exceeded on average only once in every 800 weeks.

With much of the economy at a standstill because of restrictions introduced to control the spread of the new coronavirus, while production has yet to fall significantly, stocks are likely to continue rising rapidly.

U.S. gasoline consumption accounts for almost one in every ten barrels of oil consumed each day around the world.

But the U.S. experience is almost certainly replicated across the major refining and consumption centres of Europe and Asia, though data for those areas will not become available for another couple of months.

Rising global stocks of crude and products are likely to exhaust available storage capacity within the next few months, unless oil production and refining is curbed, or travel restrictions are eased.

“The global oil industry is experiencing a shock like no other in its history,” the International Energy Agency wrote in a note published on Wednesday.

“The scale of the collapse in oil demand ... is well in excess of the oil industry’s capacity to adjust.”

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