US refinery runs languish below five-year averages as outbreak weighs on demand
Gross inputs to US refineries, also referred to as refinery runs, are below their five-year average due to reduced demand, according to the Energy Information Administration.
Demand for products such as petrol, distillate and jet fuel fell below long-term trends since April as air travel and ground transport came to a halt due to measures to contain the Covid-19 outbreak.
Refinery inputs remain between 13 per cent and 17 per cent below the five-year average.
Refinery runs reached 15.3 million barrels per day in the week ending August 21, the highest level since the coronavirus pandemic began, according to the Washington-based EIA.
However, this high point was still 14 per cent lower than the five-year average, according to the EIA.
Refinery inputs fell by 2 million bpd to 13.4 million bpd in the first week of September and were down 16 per cent against the long-term average.
Refinery runs have since stayed below July and August levels and have averaged about 14 million bpd through to October 23 .
Slowing economic activity also weighed on the global demand forecast as the pandemic led to factory closures and millions of job losses across the US.
“Since the end of August, the continued effects of the pandemic in the US and in crucial destinations for US petroleum exports in Europe and Latin America, in addition to seasonal factors, have resulted in continued lower refinery runs,” the EIA said in its report.
The US is the world’s largest producer of crude. It produced more than 12 million bpd last year and was expected to hit 13 million bpd this year.
However, output fell as several independent shale producers cut their output or went bankrupt earlier this year.
A shortage of storage space forced West Texas Intermediate, the benchmark for US oil, to fall to minus $40 a barrel in April, just before the expiry of the May contract.
The collapse in prices hit the US energy industry hard and forced several refineries to close.
Oil prices have since recovered steadily as prospects of an economic recovery and cuts by Opec+ helped reduce stock levels.
WTI fell by 4.25 per cent to $37.14 a barrel on Friday while Brent was down 3.62 per cent at $39.45 as barrel as markets factored in the prospect of Democratic candidate Joe Biden becoming the next US President.
Mr Biden is known to favour a greener agenda and has pledged to bring the US back into the fold of the Paris Climate Agreement, which Donald Trump walked away from in 2017.
The US formally exited the agreement last Wednesday.
“The economic effects of the pandemic drove the decline in diesel demand, which began largely in May. Since May, demand for some products, particularly [petrol], has increased somewhat but remains below historical levels,” the EIA said.
US energy secretary Dan Brouillette said last week that the country’s crude production would remain at about 11 million bpd.
He said there were no expectations that the US could produce 13 million bpd in the short term.
Refinery runs hit 15.3 million barrels per day in the week ending August 21, the highest level since the crisis began