A funny thing happened on April 22, 2009.
The U.S Energy Information Agency was reporting that demand for distillate fuel oil had declined by more than 315,000 bbl/day from the previous week, and more than 900,000 bbl/day from the previous year. This came after a roller-coaster year of almost comically volatile demand, and after a fairly reliable decline starting around the end of February, 2009. All of this seemed to be occuring on top of a steady stream of surprisingly good news across broad sections of the overall economy.
Put these data next to the same endpoint for motor gasoline, which after shedding 1 million barrels at the end of last summer, recovering about half that around the holidays, and then moping its way downhill for the next several weeks, had started to pick up around February 2009. And as of about two weeks ago, and most notably last week, total motor gasoline consumption was back up around 9.1 million bbl/day. This, for the United States, is fairly healthy, and would have been respectable even in those years when the “summer driving season” sounded still stupid, but not quite as stupid as it does now.
It is the opinion of our analysts in the Man-Bunny Matrix that distillate demand is generally the superior economic indicator. The bulk of these data reflect demand for Fuel Oil #2. This is the petroleum fraction consumed, depending on sulfur content, as on-road and off-road Diesel Fuel, and as Home Heating Oil. High-sulfur heating oil demand is almost exclusively a function of weather and cost, but low and medium-sulfur fuel is what you find on the job, burned in quantity whenever and wherever on the planet money is at work. Gasoline, by contrast, is (with exception) a retail consumer product. While demand for gasoline shows general annual patterns, it is subject to the vaguaries and vacillations of the consumer, whom we know to be especially vague and vacillational. He doesn’t always do what’s best for him.
We in the Man-Bunny Matrix have been mulling these data all week, and now this morning the Bureau of Labor and Statistics is reporting that in the first quarter 2009, U.S. GDP fell by a “surprising” 6.1%, while consumer spending is up 2.1% annually.
Coincidence? Correlation? Hard for us to say. Is distillate demand less negative than it might otherwise be? You mean it could be worse? I guess so. Will we see these patterns persist when the EIA releases the data for this week? We’ll know in an hour.