New outbreaks, economic uncertainty pose risks to rebounding US driving demand

Washington — US driving demand is picking back up among commuters and commercial trucks, but it may be too soon to expect rates to return to pre-lockdown levels given potential long-term remote working, the shaky economic outlook and rising infection rates in several major demand states.

Kayrros found in a recent analysis that gasoline demand from commuters and other light vehicles has seen a mostly uniform rebound from sharp lows in April, even in states with the longest lockdown restrictions.

"Today we're back up to levels of driving demand for regular drivers that we would see in a seasonal low and during the holidays," said Ted Hall, Kayrros' vice president for market strategy.

However, diesel demand from long-haul trucking appears to be stagnating, even though it never plummeted like commuting did when governors ordered residents to stay at home. Hall said the lows for trucking demand were equivalent to January slowdowns when truckers take time off after the holidays.

Hall said this slower recovery for trucking could be an indicator of economic trouble ahead.

"If we're being optimistic, there's a lag effect where once regular activity resumes then commercial activity will come on," he said. But "the concern here is that might be an early indicator that the economy isn't coming back quite in the way we were hoping."

Weekend, summer miles

Gary Eisen, an economist for S&P Global Platts Analytics, said rebounding driving trends seen in Inrix and Apple Mobility data indicate that either commuting is returning stronger than expected or that drivers are doing more discretionary trips since being cooped up while working from home.

Eisen estimates that travel to and from work typically accounts for roughly 30% of US driving demand. Record low unemployment numbers have eased in recent weeks, with payrolls seeing an unexpected increase in May.

"One of the things that's striking is weekday travel hasn't picked up that much," Eisen said. "It's better than where it was in April but a fraction of what has happened to weekend demand."

Eisen said last summer's surge in air travel without any corresponding boost to driving demand could lead to a bump in vacation driving this summer as Americans shun airplanes but still want to get away.

"I do believe we're going to get a boost this summer from that source," he said. "That will be another part of the story."

Platts Analytics estimates US gasoline demand sank to 5.9 million b/d in April during peak lockdown restrictions before rising to 7.2 million b/d in May and 8.8 million b/d by December. It sees US gasoline demand averaging 8.1 million b/d in 2020, down from 9.3 million b/d in 2019.

Diesel roadblock

The US diesel demand outlook has been hard to pin down because of temporary surges in demand this spring such as for shipping medical supplies early in the outbreak and then planting season in farm country.

"Trucking was fine and then it all of a sudden fell off a cliff," Eisen said. "All of these temporary props to demand suddenly disappeared. Now you're looking at this dark possibility you're going to see numbers in the 3.4 million b/d range."

For now, Platts Analytics estimates US distillate demand bottomed out in April at 3.4 million b/d and will stay around 3.7 million b/d through September. It sees US distillate demand averaging 3.9 million b/d in 2020, down from 4.1 million b/d in 2019.

Outbreak risks

Rising infection rates in several states in the past week also present major risks to recovering US oil demand.

California, Texas and Florida -- the three top US gasoline demand states -- plus Georgia, Louisiana and North Carolina have seen coronavirus cases increase by at least 40,000 in the past two weeks.

The six states accounted for 3.3 million b/d in gasoline demand before the crisis, or 35% of overall US demand, according to US Energy Information Administration data.