US Oil Demand Starts To Respond To Lower Prices
The oil price band theory we talked about back in June is starting to kick in. There is a caveat, however, oil prices have retraced the entire rally to where we basically started the year. So for oil bulls to take comfort in this fact, we would need to see demand continue to improve as prices inch higher.
For those of you that have read our OMFs in the 2nd half of the year, you will have noted that we repeatedly said the weekly demand figures in the EIA oil reports are flawed. While EIA has the tendency to understate total implied oil demand, the gasoline, jet fuel, and distillate demand trend has been somewhat accurate. Notice how we said trend here and not the absolute figure.
In the latest dataset, you can see the sudden jump in the 4-week average. Demand has surprised to the upside the last few weeks, and with the help of colder-than-normal weather, demand surprised to the upside.
But the key figures, in our view, are the big 3: gasoline, distillate, and jet fuel.