U.S Consumer Oil Demand Has Exceeded Expectations, Likely to Remain in Good Health

Earlier in the year, Wall Street was mostly bearish about the U.S. economic outlook with many warning of a looming recession. Not surprisingly, many oil punters expected oil demand to crash as unemployment rose and companies cut output thanks to aggregate demand falling.
Luckily, these predictions have turned out to be dead wrong. So far, the economy has proven to be remarkably resilient, managing to expand at a respectable annual clip of 2.4% in the second quarter after growing 2% in the first quarter. The unemployment rate currently stands at 3.6%, close to a 50-year low, while employers are still adding hundreds of thousands jobs every month. In early July, 71% of forecasters in an NPR survey said a recession is unlikely in the coming year.
Oil demand has generally held up much better than predicted.
According to commodity analysts at Standard Chartered, gasoline and jet fuel demand–both closely associated with household behavior– have outperformed strongly relative to the start-of-year expectations by the Energy Information Administration with gasoline demand having risen 98 kb/d y/y.
In contrast, the industrial side of things has been below par, with demand for distillate (including diesel) failing to meet expectations with distillate demand down 169 kb/d y/y; gasoline demand has risen y/y by 98kb/d.
StanChart notes that a strong deflationary price effect from U.S. gasoline has all but disappeared, with gas prices only marginally lower than year-ago levels. The national average of regular gasoline is hovering above $3.80 per gallon for the fourth consecutive week and may represent a headwind to gasoline demand.
Nevertheless, the analysts have predicted that the pattern of stronger-than-expected oil demand from consumers and weaker-than-expected demand from industry is likely to continue in the coming months. StanChart has also revealed that whereas volatility in the oil prices remains low, there’s been plenty of activity with Brent trading volumes over the past week 23%Y/Y higher and open interest 19% higher y/y.
Thankfully, the U.S. shale sector is likely to remain in good health.

Source: oilprice.com

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