By Stephanie Kelly, Laila Kearney and Laura Sanicola
NEW YORK (Reuters) – U.S. oil refiners and pipeline operators expect strong energy use in the second half of 2022, although analysts and industry watchers fear demand could falter if the global economy enters a recession or high fuel prices put travelers off.
The company’s forecasts suggest stronger sentiment than the latest data, which showed weakness in US fuel demand, particularly for gasoline, where consumption recently hit its lowest level since February, despite being in the middle of the summer peak season.
US gasoline product delivered in the past four weeks recently fell below 2020 levels for the same time of year when the United States was in the depths of the pandemic.
Energy companies including Energy Transfer LP and PBF Energy Inc say energy demand will be strong in the second half of 2022, according to a Reuters review of corporate earnings calls.
“Management sees what’s going on on the ground, so we find that interesting every time they call out positivity when the demand data has shown otherwise,” said Kian Hidari, an analyst at Tudor, Pickering, Holt and Co. “It is still such a strong environment for gasoline compared to historical levels.”
US refiners are also benefiting from high exports of fuels for transportation to Latin America, and plants are expected to be running at high capacity to replenish inventories that were being depleted when fuel supplies collapsed earlier this year.
Refinery exports of finished petroleum products in May were 3.02 million barrels per day (bpd), broadly in line with the five-year seasonal average, the latest available data, according to the US Energy Information Administration. That was almost 65% more than the pandemic low reached in May 2020.
U.S. oil production rebounded to 12.1 million barrels per day, which helped boost pipeline and terminal volumes for many midstream companies in the second quarter year-over-year. Energy Transfer reported better-than-expected second-quarter performance and raised its guidance for the rest of the year, said co-chief executive Thomas Long.
Of the 16 midstream companies that reported earnings last week, more than half have upgraded guidance, said James Mick, portfolio manager at Tortoise Capital Advisors.
The four-week average implied demand for gasoline fell to just under 8.6 million barrels per day (bpd) in the week ended July 29, the lowest since February, EIA data said, though the weekly number has been volatile could be.
“We are positive on the outlook for transportation fuels, supported by low product inventories and healthy global demand,” Michael Jennings, chief executive of HF Sinclair Corp, said Monday when speaking to analysts.
Inflation is rising sharply this year, but with US job growth unexpectedly accelerating in July, economists are less concerned about an imminent recession.
The only U.S. refiner to find a drop in demand in its earnings call was CVR Energy Inc, particularly in the mid-continent, which includes states like Kansas and Oklahoma, Hidari said. The company said it has seen some demand destruction as consumers shy away from driving as retail gasoline prices have topped $4 a gallon.
(Reporting by Stephanie Kelly, Laila Kearney, and Laura Sanicola; Additional reporting by Arathy Somasekhar; Editing by David Gregorio)