MSR: U.S. Petroleum Markets Buoyant in October, But Have Entered a Winter of Uncertainties

Dean Foreman
Posted November 17, 2022

In recent months, we have described how oil markets have grappled with competing indications of solid demand and tight supplies, on one hand, yet concerns for slower but not recessionary economic growth on the other.

Amid these moving parts, API’s latest Monthly Statistical Report (MSR™), with primary data through October, suggests that the momentum of economic growth has continued to rule the day.  Highlights:

• U.S. petroleum demand of 20.3 million barrels per day (mb/d) in October was marked by the second highest demand for “other oils” (that is, naphtha, gasoil, propane/propylene) on record since 1965, as well as a 12% monthly increase for distillates.
• Refining throughput and capacity utilization rates rose to their highest levels for the month of October since 2018.
• Crude oil production rebounded to 12.1 mb/d, its highest for any month since March 2020.
• U.S. petroleum net exports of 2.1 mb/d set a new record high for any month since 1947.

U.S. petroleum demand was solid at 20.3 mb/d in October and also 20.3 mb/d on average for the first 10 months of 2022. The year-to-date average (ytd) was within 1.3% of its highest level over the past five years.

October showed a marked return to urban motor gasoline deliveries, up 8.5% year-over-year (y/y) that was more than offset by an 8.8% y/y decrease in rural deliveries – likely reflecting continued post-pandemic return to work commuting. Distillates (mainly diesel fuel and heating oil) demand rose by 12.0% month on month (m/m) in October despite indications of weaker freight shipping by truck. Rather, as the state of freight reported, the increase apparently was due to a combination of low East Coast distillate inventories, the drought-stricken Mississippi River and a potential rail strike.

For supply, U.S. crude oil production of 12.1 mb/d rose to its highest level since March 2020 but remained below its highest level of 13.0 mb/d in November 2019. On the heels of record-high U.S. natural gas production, the extraction of 6.1 mb/d of natural gas liquids was the highest for the month of October and second highest for any month on record since 1973.  The rates of refining activity and capacity utilization were also at their highest for the month of October since 2018.

Amid the disruptions that Russia’s war in Ukraine has had on global oil markets, total U.S. exports of crude oil and refined products eclipsed a record 10.0 mb/d for a second straight month, and U.S. petroleum net exports – which, as we’ve emphasized, help support domestic job and economic growth – rose to 2.1 mb/d, the highest for any month on record since 1947.

Last but not least, API’s Distillate Economic Indicator™ had a reading of +1.3 in October – up from +0.9 in September – and a three-month average of +1.1, which showed continued growth of U.S. industrial production and broader economic activity.  This month’s publication of the Distillate Economic Indicator™ completes four years of API’s publication of statistic, and over this period it has established an accurate record of indicating U.S. industrial and economic growth.

Overall, the October data should demonstrate to energy policymakers that oil, natural gas and natural gas liquids have remained essential to U.S. economic activity and consumer health – as winter begins, OPEC has implemented its announced November production cuts and the Russia G7 price cap plus EU sanctions risk disruptions to global oil markets. 

Let’s delve into details of the key observations from October.

U.S. petroleum demand showed no signs of an economic recession by remaining near the top of the five-year range.  The underlying current through demand has been a partial reversal of fuel substitution that was seen through the 2020 COVID-19 pandemic.

For one thing, an increase in urban commuting was evident.  Deliveries of reformulated-type gasoline (consumed primarily in urban areas) rose by 8.5% y/y to 3.0 mb/d, while those of conventional gasoline (consumed mainly in rural areas) decreased by 8.8% y/y to 5.7 mb/d.

For distillates, demand rose in October despite indications of weaker freight trucking activities.  DAT iQ industry trendlines showed that the quantity of spot loads available for transport in October fell by 51.8% y/y, while the availability of spot trucks rose by 19.8% y/y, which together showed there was slack freight trucking markets.

Deliveries of refinery and petrochemical liquid feedstocks (naphtha, gasoil, and propane/propylene) were 5.5 mb/d (27.1% of total U.S. petroleum demand) in October, the second highest reading for the month of October on record since 1965. These reflected increases of 3.0% m/m and 4.8% y/y – as well as continued solid demand for films, packaging and medical plastics.

Supply responded. U.S. crude oil production of 12.1 mb/d in October increased by 1.4% m/m from September and by 4.2% y/y compared with October 2021. This reflected the second highest production for any month since March 2020. At the same time, U.S. refinery throughput, measured by gross inputs into crude distillation units, was 16.2 mb/d and implied a capacity utilization rate of 89.9%. The throughput decreased seasonally by 1.8% m/m but remained at its highest for the month of October since 2018. The capacity utilization rate similarly fell by 1.7% from September but remained up by 3.8% compared with October 2021. 

And U.S. petroleum trade ratcheted up to record levels. U.S. petroleum exports – crude oil (4.0 mb/d) and refined products (6.0 mb/d) – of 10.1 mb/d in total for October were the second highest on record for any month since 1947. Total exports increased by 22.2% y/y at the same time as total imports fell by 2.0% y/y. Consequently, the U.S. was a petroleum net exporter of 2.1 mb/d in October, which was the highest monthly petroleum net exports on record since 1947.

These readings of solid demand, responsive supplies. and record petroleum trade paint a picture in which U.S. industrial activity has remained robust.

As noted above, API’s Distillate Economic Indicator^™– based primarily on diesel/distillate supply, demand, and inventories – had a reading of +1.3 in October, up from +0.9 in September, and a three-month average of +1.1. This showed continued growth of U.S. industrial production and broader economic activity.

Please see the latest API MSR™ for details, product-level analysis, and data.