US Oil Demand Drops In July As Original Demand Worries Remain Valid
People are going to spin the EIA July PSM report in two different ways:
Monthly oil demand in July was ~400k b/d higher than the EIA weekly estimate or...
US gasoline demand in July fell ~378k b/d month-over-month and is ~548k b/d below last year.
While we are very bullish on energy stocks and oil, we must acknowledge that demand weakness is real. Here's a look at the implied monthly oil demand for July relative to the past:
And here are the comparison for gasoline, distillate, and jet fuel.
Gasoline
Distillate
Jet Fuel
As you can see, gasoline demand is noticeably lower than in 2021. Remember at the end of July when we wrote the report about how gasoline demand is weak, but nowhere near 2020?
This data validates it, but the weakness is noticeable. In fact, what's interesting about the data is that the weekly figures just overstated gasoline demand for 2020. Because if you look at the monthly gasoline demand vs the weekly figure, they are in line.
So while it's easy for us to dismiss this as bad data from the EIA, the monthly data confirms that US gasoline demand in July was bad, likely due to a slowing economy and elevated prices. This means that the upper band theory on where oil can go remains true ($180 crude + 3-2-1 crack).