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U.S. Refiners See Demand Holding Strong Through Year-End

American refiners and oil and gas operators expect strong demand for fuels and energy through the remainder of the year, despite analyst concerns in recent weeks that demand could take a hit with a possible recession or demand destruction.

The firms' short-term views on the market are generally brighter than most analysts', according to a Reuters review of earnings calls.  

"It's still a strong environment for gasoline compared to historical levels," Kian Hidari, an analyst at Tudor, Pickering, Holt and Co, told Reuters.

"Permian Basin volumes continue to be strong, and Permian Basin inlet volumes remained at or near record highs. We are utilizing the Permian Bridge daily to optimize our available processing capacity as well as increasing our processing capacity in the area to accommodate incremental demand we are seeing," Energy Transfer's Vice President and Chief Financial Officer, Tom Long, said on the earnings call last week.

"We expect production improvements, market conditions, and strong domestic and international demand for our products to positively impact all of our segments for the remainder of this year," Long added.

U.S. refiners said during earnings calls in July that there was no indication across their channels that America's fuel demand was weakening, contrary to recent data about gasoline consumption. The weekly inventory reports from the EIA at the beginning of July pointed to faltering demand after nationwide gasoline prices hit an average of $5 a gallon in the middle of June. During the earnings calls, however, some of the largest U.S. refiners said they hadn't seen any signs of demand destruction.    

"Through our wholesale channel, there's really no indication of any demand destruction," Gary Simmons, Executive Vice President and Chief Commercial Officer at Valero Energy, said.

Brian Mandell, executive vice president, Marketing and Commercial for Phillips 66, told analysts on the company's Q2 earnings call:

"We're at low inventories. If you look in the U.S., we're at minus 20% versus 2015 to 2019 averages. We're heading into a turnaround season. Demand is strong."

"We've seen demand better than 2019 currently," Mandell noted.  

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By Tsvetana Paraskova for Oilprice.com

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