U.S. Gasoline, Diesel Demand Hit Seasonal Low Not Seen Since COVID

Demand for gasoline and diesel in the United States has plunged to its lowest seasonally since the onset of the COVID pandemic, according to the Energy Information Administration (EIA), sparking concern that economic activity is now becoming stagnant as refining margins hit news lows not seen in months, Reuters reported. 

Monthly averages for the week ended May 3 show gasoline demand at 8.63 million barrels per day-a figure not seen since May 2020, at the start of the pandemic, based on EIA data. 

Data also showed demand for distillates plunging to 3.6 million bpd, which was also a seasonal low not hit since the pandemic. Additionally, for the first time in approximately three months, the 3-2-1 crack spread which serves as a barometer for refining markets, was trading under $26.50 per barrel on Wednesday, Reuters reports, for the lowest crack spread in three years. 

The numbers are also creating debate as to whether economic activity is slowing or whether renewables are stepping up their game in the quest to overtake fossil fuels. 

"The gasoline situation was going to be looked at by everybody and it definitely disappointed," Mizuho analyst Robert Yawger told Reuters, adding that "If that's indicative of the performance of the economy, that's bad all around."

The EIA inventory report showed U.S. distillates adding 600,000 barrels to inventory for the week ended May 3, with average production at 4.8 million barrels per day. Gasoline inventory also increased by 900,000 barrels for the week ended May 3, with production averaging 9.5 million barrels per day. 

Crude oil prices lost more ground on Wednesday following the EIA's weekly inventory report, which showed a draw of 1.4 million barrels for the week to May 3, but following a significant 7-million-barrel build from the previous week that put downward pressure on prices.

By Charles Kennedy for Oilprice.com

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