High prices seem to have started to weigh on diesel demand in the United States, where distillate inventories – comprising diesel and heating oil – have been slowly rising over the past few weeks. American distillate inventories are still below the five-year average, but the gap in stocks compared to previous years has slowly started to narrow, suggesting that high prices are hitting demand, while encouraging more refinery output thanks to solid refining margins.
A Nov. 4 Instagram post presents screenshots of multiple tweets. “BREAKING: According to the Energy Information Administration, the US only has 25 DAYS OF DIESEL SUPPLY LEFT,” reads a screenshot of one.
Over the past five years, the United States’ largest independent oil and gas company, Exxon Mobil (NYSE: XOM), has mostly focused its exploratory activities in South America. Last month, the oil major announced that it had made two new discoveries at the Sailfin-1 and Yarrow-1 wells in the Stabroek block offshore Guyana, potentially adding more barrels to one of the most closely watched new oil discoveries.
Last week, the Energy Information Administration (EIA) reported that distillate inventories were at their lowest levels since 2008. (The primary distillates are diesel, jet fuel ,and heating oil). However, in 2008 distillate levels were low coming out of spring. Currently, they are low going into fall. That’s far worse than the situation in 2008.
While the OPEC+ agreement to cut crude oil production and the U.S. reaction to it dominate headlines, a much more immediate crisis is getting worse by the day.
The Dubai benchmark oil prices, a bellwether of demand in Asia, have weakened in recent weeks, reflecting concerns about oil consumption in the most important crude oil importing region.