Gasoline demand picking up, albeit at a turtle‟s pace:: Macquarie Research,

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Gasoline demand picking up, albeit at a
turtle‟s pace
Seasonal trends held firmly in place in this week‟s batch of US oil data. The third
straight draw in crude stocks was constructive, while the build downstream
leaves total product stocks exactly in line with the long-term average. Refinery
runs have been volatile over the past three weeks, but are finally approaching a
normal level for this time of the year. The only complaint with this week‟s
inventory data comes from the lack-of-momentum in crude imports, which first
diverged from their seasonal trend in April, and have yet to show any push to
bridge the nearly-1mb/d gap between current and long-term levels. Demand
remains weak relative to last year, but has shown some improvement in recent
weeks. This can be partially attributed to a positive turn in gasoline demand
growth, while most other product categories look simply “less bad”. As we head
into 3Q11, we forecast a 1.0%y/y growth rate for total US demand, driven mostly
by middle distillates and „other products‟, while we expect gasoline demand
growth to remain flat.
IEA warns of the danger of “overheating in prices”
The recent IEA monthly report was more bullish than expected. Demand growth
is expected to rise despite already-high oil prices (with strength in emerging
economies outweighing weakness in developed), and an overheating in prices
could occur if the market remains constrained by crude supply. Notably, North
America is expected to increase production by +11% over the next 5 years,
making it the fastest growing region outside OPEC.
Top three numbers in today’s weekly US oil data
 Crude oil inventories drew moderately lower, -1.7mbs. Levels at Cushing,
OK grew by +0.3mbs.
 Downstream stocks climb higher, +4.8mbs, with the most significant
increases coming from middle distillates (+1.2mbs) and „other‟ products
(+3.4mbs).
 Demand growth remains negative at –2.7% (four week MA, y/y).