U.S. oil demand rises for first time in 5 years

By Dow Jones Newswires
Posted Feb. 25 at 3:29 p.m.

U.S. oil demand rose for the first time in five years in 2010, capped by a gain of 2.7 percent in December, government data released Friday show.

Demand of 19.148 million barrels a day was up 2 percent, or 377,000 barrels a day, from a year earlier, compared with average declines of about 950,000 barrels a day in the last two recession-hit years. Consumption in the world’s biggest oil user was some 8 percent, or 1.7 million barrels a day, less than the 20.8 million barrels a day peak hit in 2005.

Demand for gasoline, the most widely used petroleum product, averaged 9.034 million barrels a day in the year, the highest level since 2007. The gain came despite an average 18.2 percent rise in the national average price of regular gasoline, to $2.78 a gallon, the highest since 2008.

Consumption of distillate fuel (diesel/heating oil) rose 4.5 percent, or 163,000 barrels a day, to 3.794 million barrels a day, the most since 2008.

Within the distillate figure, demand for ultra-low sulfur diesel used in trucks averaged 3.207 million barrels a day, up 12.8%, or 364,000 barrels a day, from a year ago. Demand was just 1,000 barrels a day below the record set in 2008.

December oil demand, the highest since May 2008, was 521,000 barrels a day, or 2.7 percent, above a year ago, at 19.758 million barrels a day. That was down 1.2 percent, or 242,000 barrels a day, from the earlier estimate, largely due to a downward revision in gasoline use.

Gasoline demand averaged 8.972 million barrels a day, up 41,000 barrels from a year earlier, but 2.4 percent, or 217,000 barrels a day, below the estimate. Retail gasoline prices in December averaged $2.99 a gallon, up 14.8 percent from a year ago and the highest since October 2008. December’s average price was the highest for the month since 2007.

Distillate demand surged 8 percent, or 308,000 barrels a day, in the month to 4.169 million barrels a day, counter to preliminary data showing no significant year-on-year change. Demand was the strongest in any month since October 2008.

In the distillate figure, demand of ultra-low sulfur diesel fuel jumped 622,000 barrels a day, or 22.4 percent, from a year earlier, to 3.395 million barrels a day. Demand was up slightly from the November level and the highest since September.

Despite the sharp revision, December was the 11th straight monthly rise in year-on-year demand. That’s the longest streak since 14 months of increases between December 2003 and January 2005.

But the December demand level appears stronger than the numbers suggest because it shows a sizable rise from a year-ago level that itself was a 15-month high.

The year-on-year rise in November, of 1.7 percent, or 321,000 barrels a day, was measured against a year-earlier level that was the lowest since 1998.

But the outlook for continued strength in U.S. demand remains cloudy. Preliminary weekly data showed January demand fell below 19 million barrels a day.

Retail diesel fuel prices averaged $2.99 in 2010, up 21.3 percent and the highest price since 2008. December’s average of $3.24 a gallon was the highest since October 2008 and up 18 percent from a year earlier.

Demand for jet fuel averaged 1.383 million barrels a day in December, little changed from a year earlier, but 5 percent, or 73,000 barrels a day, below the earlier estimate. For all of 2010, demand averaged 1.424 million barrels a day, up 2.2 percent from a year earlier and the highest since 2008.

Demand for heavy residual fuel, used in industrial boilers and power plants, averaged 571,000 barrels a day in December, down 1.9 percent from a year earlier, but was up 7.6 percent for the full year, at 550,000 barrels a day. The annual rise in residual fuel use comes against a 2009 level that was the weakest in more than 70 years of EIA records, as the fuel has steadily been losing market share to competing natural gas.

Residual fuel was the only component of the core four oil petroleum products to show a decline in December. All main products posted year-on-year gains in 2010.

In December, two-thirds of the demand rise was attributed to the core four products, excluding propane/propylene and “other oils” and a catch-all grouping of lesser-used products. For all of 2010, core four products demand accounted for 70 percent of the rise.

Separately, EIA data show U.S. refiners paid an average of $76.69 a barrel for crude supplies in 2010, up 29 percent from a year earlier and the highest since 2008. December crude acquisition costs averaged $85.65 a barrel, up 17.4 percent, and the most since September 2008.

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