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US Refiners Hit 4-Year High Utilization Rate as Weak Demand Drags Down Sector, TPH Says

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US refining utilization surged to its highest level in four years, reaching 98% last week, TPH Energy analyst Matthew Blair said in a note on Thursday, citing Energy Information Administration data.

However, Blair said that the record activity failed to deliver a bullish outcome for the sector as cooling fuel demand weighed heavily on inventory draws.

The consultancy said that last week's utilization rate outpaced the five-year seasonal average of 90.7% and marked the highest reading for the industry since early August 2018.

Despite the record processing pace, inventory updates fell short of expectations against a backdrop of high retail pump prices, with US gasoline and diesel averaging $4.21 per gallon and $5.60/gal, respectively.

EIA data show gasoline stocks declined by 1.2 million barrels, missing the consensus draw of 1.6 million barrels, Blair said.

Meanwhile, distillate inventories rose by 800,000 barrels, contrasting with analyst expectations for a 1.5-million-barrel drop. Jet fuel stocks edged up by 200,000 barrels.

Blair said that demand metrics showed notable weakness, particularly for distillates.

Four-week average distillate demand contracted by 6%, deteriorating from a 2.2% decline the previous week. Gasoline demand also softened, dropping 1.6% compared to a 1.1% decline a week earlier.

Jet fuel demand proved to be an exception, improving to a 0.6% decline from 2.3% the prior week.

However, despite softening domestic demand, Blair said that robust international appetite amid a global supply crunch kept US product exports strong.

Gasoline exports ticked up week-over-week to 882,000 barrels per day, outpacing the historical average of 860,000 b/d. Distillate exports dropped to 1.77 million b/d but remained well above the 1.33 million barrel average.

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