After a year of getting pummeled by the coronavirus, U.S. oil demand is bouncing back -- and this time it looks like it’s here to stay.
Retail gasoline sales rose last week to just 1% below year-ago levels, just before regional lockdowns brought fuel consumption to a crawl, Patrick DeHaan, head of petroleum analysis at GasBuddy said on Twitter. Gasoline’s recovery comes on top of a diesel rebound that started last fall as consumers began to rely on home-delivery services like Amazon.com Inc. more than ever. Even jet fuel is looking up with newly vaccinated passengers eager to fly after a year of restrictions.
With new coronavirus infections falling to a record low last week and vaccination efforts ramping up, this latest demand rebound comes with a lower threat of being set back again by new outbreaks. The timing couldn’t be better for the oil industry that relies on the busy summer driving season to buoy profits. It could mark a huge turnaround for fuel suppliers that since last spring had struggled with the weakest seasonal consumption in more than 20 years.
Demand “will continue to improve with warmer weather and reopenings and things getting back to normal, coupled with pent-up demand,” said Trisha Curtis, chief executive officer at oil analysts PetroNerds in Denver. “We definitely see some bright spots with vaccine uptake.”
The drag on jet fuel is showing signs of cracking. Air passenger numbers hit a 12-month high on Friday. Global seat capacity has improved to 39% below a year ago, compared with an annual deficit of 41% a week earlier, and 44% the week before that, data from air traffic consultant OAG Aviation shows. That’s happening as newly vaccinated Americans are preparing to take to the skies again for summer vacations.
Green shoots are emerging elsewhere as well. Industrial output in China surged in the first two months of the year, underscoring its rapid economic rebound. The country processed more than 14 million barrels a day of crude in the first two months of the year.
Still, the recovery is just beginning. Restrictions on schools and businesses vary regionally. One-off events can also hamper the rebound, such as last weekend’s blizzard in Colorado and Wyoming that triggered power outages and forced flight cancellations. Many businesses, including BP Plc, will allow office staff to continue to work from home two days a week, throwing into question if U.S. gasoline demand will see a full recovery this year.
“Broadly speaking, gasoline demand remains 10-20% lower compared to pre-pandemic levels,” Matt Price, vice president of petroleum pricing and analytics at national fuel retailer Pilot Corp., said in an email. “Some pockets of the country, such as Florida, have seen demand for gas recover fully over the past year, while others, like Illinois, still see decreased demand.”
Total refined product demand on a four-week average basis as tracked by the Energy Information Administration was more than 1 million barrels a day below the same time a year ago for the week ended March 5.
“Gasoline demand is still well off its pre-Covid highs, even though it has seen a remarkable recovery,” Curtis said.