What Recovery? Petroleum Deliveries Lowest Since September 2008; Weakest July Demand Since 1995

Tyler Durden's picture

While the Achilles heel to the endless "economic data" BS coming out of China may be its electric production and demand, both of which show a vastly different picture than what the Beijing politburo's very wide brush strokes paint, the US itself is not immune from indicators that confirm that anything the BEA dishes out should be taken with a grain of salt. One data set that we showed recently that paints a drastically different (read slowing) picture of the US economy which we noted recently is railcar loading of waste and scrap for the simple reason that "The more we demand, the more waste is generated by that production." Of course, the propaganda manipulation machinery only focuses on the "entrance" of production, and completely ignore the "exit." But an even far more important metric of the general health of the US economy may be none other than broad energy demand, in the form of petroleum deliveries and gasoline demand. If this is indeed the relevant metric to observe, then things are about to get far, far worse. As Dow Jones notes: "U.S. petroleum deliveries, a measure of demand, fell by 2.7% in July from a year earlier to the lowest level in any month since September 2008, the American Petroleum Institute, an industry group, said Friday." It gets worse: "Demand in the world's biggest oil consumer, at 18.062 million barrels a day, was the weakest for the month of July since 1995, the API said. Year-to-date demand is down 2.3% from the same period in 2011."

Did Americans forget to drive?

Demand for gasoline, the most widely used petroleum product, dropped 3.8% from a year earlier, to 8.624 million barrels a day, the lowest July level since 1997. Gasoline use in the heart of the peak summer driving season was 2.2% lower than in June. January-July gasoline demand averaged 1.1% below a year earlier, at 8.671 million barrels a day, the API said.

Oh well, maybe Americans just decided to take the peak driving period of the summer season off for some reason. Demand for other distillates would still be high... assuming the economy was chugging along. Yes. And no.

Kerosine-based jet fuel use fell 0.8% in July from a year ago, to 1.455 million barrels a day, while demand for heavy residual fuel, used in power plants and industrial burners, dropped 7.1% year-on-year, to 294,000 barrels a day.

One would think that with collapsing demand, for whatever reason, the production side would slide as well, especially since the price of WTI is soaring and is back to just shy of $100, causing the Margin Hiker-in-Chief to grumble. One would be wrong.

Production of all four major products--gasoline, distillate, jet fuel and residual fuel--was greater than demand for those products. As a result, petroleum imports decreased and exports increased. Total imports of crude and refined products fell by 9.6% to average 10.4 million barrels a day in July. Exports of refined products increased 11.1% to a record high for July of 3.244 million barrels a day, and year-to-date exports were up 14% compared with the same period in 2011.

 

Refineries operated at 92.7% of capacity in July, the second month in a row above 90%.

 

Crude oil production rose 13.6% year on year in July to 6.225 million barrels a day, the highest July level since 1998. Year-to-date output averaged near the July level and was up 11.9% from the same period in 2011.

But, how is it possible than in light of collapsing demand in the world's marginal consumer of gasoline, that crude prices are not only flat, but have in fact entered a bull market in the past 3 months? Simple: we wrote about it in "Monti's bluffing unleashes bull market in crude."

What was the bluffing? Simple - that no matter what happens, Draghi will print. At least now we know who all those 'evil speculators' are that Obama bashes every time unleaded approaches $4.00 and Brent reaches fresh record highs in EUR terms. Such as now.

As for what all this means for the economy, the API chief economists summarizes it best.

"While retail sales for July are up and housing has improved, the weak petroleum demand numbers are a strong indication the economy is still faltering," said John Felmy, API chief economist. "Unfortunately, achieving robust growth will likely continue to be an uphill climb given the nation's fiscal challenges, business uncertainty, and a European economy in jeopardy of sliding back into recession."

It also means fresh all time highs in the S&P. Why? Because.

From API: