Recently, decreasing demand of U.S. petroleum products weighs on the crude oil market.
American Petroleum Institute announced that the U.S. petroleum deliveries in 2011 fell 1.2% from a year earlier to 18.95 million barrels per day.
Especially, gasoline deliveries decreased 2.1% on year to 8.8 million bpd. The motor fuel consumption seemed to have been depressed by the average retail gasoline price that jumped by 25% on year.
API also said that the U.S. petroleum products demand in December 2011 fell 5.9% on year to 18.57 million bpd, while the U.S. Energy Information Administration showed petroleum supply in the last week slipped 7.2% from a year ago to 17.9 million bpd. The decline of demand seems to become severe gradually.
Does the weak demand of petroleum products reflect declining U.S. economy?
The following chart shows that the movement between the U.S. petroleum demand and industrial production had a close relationship until late 2010. However, the correlation disappeared in 2011 when the demand of petroleum products decreased despite the steady industrial production index.
The market sentiment to the U.S. economy has improved since last September. Near-term forecasts are also relatively bullish. In spite of that, the petroleum demand decreases further.
Meanwhile, the U.S. electricity supply in the first 10 months in 2011 rose 0.3% from a year ago and natural gas consumption increased 3.6% on year. They were contrastive with the dull petroleum demand. It suggests that entire U.S. energy demand is necessarily not decreasing.
Composition of the U.S. energy consumption is about 38% of petroleum, 25% of natural gas, 22% of coal, 9% of nuclear and 6% of renewable energies.
U.S. has relatively relied on petroleum, but the energy consumption may be shifting to other resources such as natural gas. Then such change may be causing the current disagreement between petroleum demand and industrial activities.
Aggressive development of shale gas has eased supply and demand of natural gas in North America in the past few years. Thus U.S. natural gas prices have been weaker compared with petroleum prices.
Crude oil price is more than six times higher than natural gas now if you convert both prices into million British thermal unit.
Crude oil prices have been more than 2.5-3 times higher than natural gas over the past two years after the market turmoil in 2008. It might be enough time to encourage industrial players to change energy use.