US oil demand rose by a massive 1.22 mb/d (6.3%) y/y to 20.46 mb/d in January, a 0.34 mb/d downward revision to the weekly data, compared with our projections for a 1.0 mb/d downward revision. This was the strongest January reading since 2007 with y/y growth the highest since October 1996. Combined demand for the four main products rose by 0.73 mb/d y/y, led by surging diesel consumption, while demand for ‘other oils’ rose by 0.49 mb/d.
After falling for two straight months, gasoline demand rose by 0.24 mb/d y/y to 8.74 mb/d in January, led by PADD 2 (74 thousand b/d), PADD 3 (0.11 mb/d) and PADD 5 (0.11 mb/d). PADD 1 demand fell by 67 thousand b/d y/y to a two-year low as a series of winter storms reduced driving.
Diesel demand rose strongly in January, by 0.61 mb/d y/y to 4.39 mb/d, bolstered by continued macroeconomic momentum and an uptick in residential heating demand. Domestic freight shipments grew by 12.5% y/y in January according to the Cass Freight Index, while US housing starts were 7.3% higher y/y despite a series of winter storms. PADD 1 demand rose y/y by 0.33 mb/d to 1.70 mb/d as cold snaps from late December boosted oil-weighted HDDs in the Mid-Atlantic region by 25.8% y/y to above seasonal norms in January.
Jet demand fell y/y in January, for the first time in 11 months, by 7 thousand b/d to 1.59 mb/d as winter storms caused hundreds of cancelled flights along the USEC and Texas. PADD 2 logged relatively robust growth, in line with the 2.3% hike in regional airport operations, but demand in PADD 3 fell by 0.11 mb/d. Demand for fuel oil also declined in January, down by 0.12 mb/d y/y to 0.34 mb/d as bunkering demand fell off the USGC and USWC on a combination of winter disruptions to port operations and less competitive regional pricing compared with January 2017. Still, PADD 1 demand rose by 22 thousand b/d y/y as cold weather boosted fuel oil usage in the power sector. Colder weather also boosted US propane demand, which grew by 31 thousand b/d y/y to 1.39 mb/d, while ethane demand jumped by 0.26 mb/d y/y to 1.43 mb/d as new steam cracking capacity on the USGC ramped up.