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Why US implied oil demand has regained most of 2013′s growth

Khyathi Dalal

Must-know crude oil tanker outlook: Some good news and bad news (Part 2 of 10)

(Continued from Part 1)

Products supplied

Products supplied approximately represent the consumption of petroleum products, as it measures the disappearance of these products from primary sources like refineries, natural gas processing plants, blending plants, pipelines, and bulk terminals. Finished motor gasoline, kerosene-type jet fuel, distillate fuel oil, residual fuel oil, propane or propylene, and other oils are included in products supplied.

Falling products supplied

For the week ended April 18, 2014, total products supplied stood at 18,051 thousand barrels per day, as compared to 18,414 thousand barrels a day for the prior week. Over the last four weeks, an average of 18.24 million barrels per day of product oil was supplied, down 1.7% from the same period last year. Just a few weeks or months ago, year-over-year growth averaged roughly 3.0%.

Last week’s data shows a pretty weak picture. Not only has the trend been down over the past few weeks, but the U.S. also essentially gave up all of the growth that it saw toward the second half of 2013. Of course, this should have negatively affected crude tankers such as Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), Teekay Tanker Ltd. (TNK), and Frontline Ltd. (FRO) over the past few weeks.

Short-term weakness or a material change?

Is this a sign of weakness in the United States’ industrial and economic growth, or should investors shrug the weakness off? The market isn’t talking about the possibility of much weaker growth and manufacturing activity in the United States. Most expect economic growth to trek along as the Federal Reserve (the central bank of the United States) winds down its quantitative easing program. If that’s the case, then oil consumption should rebound sooner or later, which would help crude tankers and the Guggenheim Shipping ETF (SEA).

But it might be wise for investors to follow key economic developments in the United States using indicators such as home sales and the ISM manufacturing purchasing managers’ index (or PMI).

Continue to Part 3

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