With millions of barrels of daily refining capacity offline and as information continues to funnel out about an improved outlook for the oil and gas industry, optimism abounds for U.S. oil refiners that are still in the game.
Oil giants Chevron, ExxonMobil, Phillips 66, Valero and LyondellBasell just posted third-quarter profits that trounced market expectations showing U.S. gasoline and diesel fuel demand to have nearly recovered to pre-pandemic levels following the sudden drop in travel and business activity during the worst of 2020.
During the 2021 North American Industrial Market Outlook Mid-Year Update given by Industrial Information Resources (IIR), Chris Paschall, vice president of research for the oil and gas industry at IIR, said that when you look at spending across the entire oil and gas supply chain today in the U.S. and Canada compared to January, there has been a growth of about 10% in active projects.
“Collectively between the three segments—upstream, midstream and downstream – we’re tracking $690 billion worth of activity in the U.S. and Canadian markets,” Paschall said. “Those are projects that are either under construction or that may have a future construction date.” Paschall broke it down further and said that the increase in spending for upstream since January 2021 is up by 16%, up for midstream by 8%, and up about 8% for downstream as well.
“When I look at the price of crude oil now and then take a snap shot of active projects, I’m optimistic,” said Paschall. “Hopefully we’ll be able to carry this for the rest of this year and on into the next,” he added.
On the refining side in U.S., Paschall said he looks at where the demand is in the three different areas—gasoline, diesel and jet fuel and stated that gasoline demand is back.
The U.S. Energy Information Administration (EIA) reported that growth in employment and increasing mobility led to rising gasoline consumption in 2021.
Diesel is currently oscillating at 90 to 100% from before the pandemic hit and jet fuel continues to ramp up as people start to travel again, not only in the U.S. but around the world, Paschall said.
“When you look at the U.S. Gulf Coast gasoline crack, which is a good barometer for Gulf Coast refiners, you can see where it has remained healthy as demand continues to pick up. It does look pretty good for the U.S. refining fleet at the moment,” said Paschall.
