IEA report: US oil demand recovery steps on the gas

Signs that the US is experiencing at least a temporary surge in oil demand were reinforced Wednesday after the International Energy Agency said the US has seen its biggest spurt in demand growth for almost a decade.

In its latest monthly oil market report, the IEA said US oil demand likely averaged nearly 19.1 million b/d in September, up 900,000 b/d year-on-year and the fastest pace of growth experienced in nearly 10 years.

It also said US oil demand appeared to have jumped above 20 million b/d last month for the first time since the 2008 financial crisis. But the agency said it was “discounting” the preliminary number, which is likely missing an accurate levels of product exports.

The forecast comes a day after the US’  Energy Information Administration said that oil demand growth in the US is now at the highest level since 2010.

In its Short Term Energy Outlook, the EIA said US oil demand will rise by 1.7% this year, posting its first rise since 2010.

So why the sudden burst of US demand for fuels? The first explanation seems to stem simply from the recent softening in global oil prices. US gasoline sales in particular have seen a lift due to declines in pump prices, the IEA notes. US gasoline demand rose 1.6% year-on-year in October to 8.85 million b/d, according to the IEA.

Average retail prices of regular gasoline in the US, at around $3.60 per gallon, were also nearly 25 cents/gal lower on the year earlier, a margin that almost doubled to 50 cents in October.

At the same time an overall US economic recovery has helped boost average vehicle miles travelled statistics by around 1.5%, it noted, and fueled a “vigorous growth” in the US petrochemical sector.

In October, the demand impact of a partial government shutdown was milder than expected, the IEA said. US demand was estimated at 18.7 million b/d for the month, 130,000 b/d more than it has previously estimated.

Largely as a result of the stronger US demand, the Paris-based IEA hiked its estimates for world oil demand in 2014 by 240,000 b/d to 92.4 million b/d.

The demand kick will have a direct impact on the need for OPEC’s oil.

The IEA raised its “call on OPEC crude” for the first quarter of 2014 by 300,000 b/d to 28.9 million b/d. The call on OPEC oil was kept roughly unchanged at 30 million b/d for full-year 2013 but has risen by 200,000 b/d to 29.3 million b/d for 2014.

The day before, OPEC left its own estimate for demand for its crude next year unchanged at 29.57 million b/d but said it expected the call on OPEC to fall from 30.4 million b/d in the fourth quarter of this year to 29.16 million b/d in the first quarter of 2014.

Platts