Has Domestic Consumption Already Reached Its Peak?

Energy futures are trying to bounce after 4 days of selling have pushed the complex to the edge of a technical breakdown yet again. The difference this time, compared to the handful of other times we’ve seen technical support tested this summer, is that sentiment seems to have quickly shifted to acknowledge that domestic consumption may have already reached its peak for the year, with another long uncertain winter looming.  

We’ll need to see refined products rally another 5 cents or so from current levels to break the short-term downtrend, otherwise it looks like we’re set up for a test of the $2 mark for both gasoline and diesel as we move into September.

This Reuters article highlights the uneven demand recovery for petroleum products since the start of COVID, and why unfinished products are driving total consumption back above pre-pandemic levels even as traditional consumption stalls.

The API was said to show another week of only minor changes in US inventory levels, with crude and gasoline stocks both down around 1.2 million barrels, while diesel inventories were up around 500,000. The DOE’s weekly report is due out at its normal time this morning. 

Both Grace and Henri are now forecast to reach hurricane strength this week. Neither storm should be a major disrupter for energy supplies. Grace continues to shift south on its way towards Mexico, while Henri could brush Cape Cod on its way north, which could create some delays in vessel traffic in the region. 

A report from the Dallas FED this week highlighted the rapid growth of renewable energy sources in Texas over the past decade, and discusses the challenges that brings for the state’s electric grid, particularly with solar production set to quadruple in the next few years.

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