USA Vehicle Miles Quietly Eclipse Pre-Pandemic Levels
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An informed market watcher highlighted a significant milestone in demand this week, which is all the more noteworthy considering the continuation of certain Covid-19 related restrictions. Read on for more information, along with other insights.
Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?
Mark Le Dain, Vice President of Strategy at Validere: What were some surprises? Vehicle miles travelled in the U.S. quietly eclipsed the same period in 2019. This is a robust indicator considering the number of people still working from home, combined with remaining restrictions in certain states. If gasoline imports start to decline these next several weeks, as referenced in quarterly transcripts, we could see stronger product draws.
Gerrad Heep, Partner-in-Charge, Energy - Assurance at Grant Thornton: In late May of this year, I responded that the development I would be on the lookout for was a potential increase in demand for Crude due to the end of the school year and the beginning of summer vacations. By most accounts, people were traveling this summer at pre-pandemic levels and the increase in demand was reflected in the market. WTI was trading around $65 at the end of May and has been well into the $70s for the summer months, topping $75 the July 4 weekend.
Tom McNulty, Houston-based Principal and Energy Practice Leader with Valuescope, Inc: The U.S. Energy Information Administration (EIA) came out with its crude inventory data and reported that inventories dropped by 4.1 million barrels last week. This appears to be supporting firmer crude prices today. However, it is important to understand why inventories declined. Imports dropped, so less imported crude went into inventories. Weekly production also declined. But I expect that to go up again quickly. Above all, crude oil inventories dropped because crude moved from inventory into the refining complex to make fuel. Fuel demand is high in North America and in Asia. Aviation fuel in particular has seen shortages.
Rigzone: What were some market surprises?
Mcnulty: Look at how natural gas prices have held firm above $4.00. Natural gas is still the fulcrum energy commodity, critical to the complex. In context, last year in the U.S., renewable energy sources generated a record 834 billion kWh’s of electricity, per the EIA. But natural gas continued to produce more electricity than renewables. It will continue to take share from coal generation, as will renewables, but natural gas is critical for both baseload security and emergency spinning and black start capabilities. Production will go up.
Heep: Although the U.S. rig count is still about half of what it was before the pandemic, the rig count in the Anadarko Basin has recovered to January 2020 levels.
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