In its monthly Oil Market Report released this morning, the International Energy Agency (IEA) raised its global demand projections for 2012 and 2013 by 100,000 barrels a day to 89.8 million barrels a day in 2012 and 90.6 million barrels a day in 2013. The change was primarily due to an adjustment to the 2011 data, with global demand growth estimated at 800,000 barrels a day in both years.
On the supply side, August data indicates supply fell month-over-month by 100,000 barrels a day to 90.8 million barrels a day. Nigeria, Angola and Iraq increased production during the month, but the increase was not enough to offset outages in non-OPEC countries, like the United States, where Gulf of Mexico production was shut down in advance of Hurricane Isaac.
Prices for refined products remained high in August, outpacing even the rising price for crude. The higher refining margins boosted refinery output by 450,000 barrels a day compared with output in August 2011. The higher refinery throughput lowered global crude stockpiles by 16.5 million barrels in July and an estimated 23.7 million barrels in August. Refined product stockpiles rose by 32.8 million barrels in July and another 4.2 million barrels in August.
The IEA’s report, especially as it relates to refined products, matches up quite well with what’s been happening in the United States. Prices for refined products like gasoline and diesel fuel do not fall as quickly as they rise. When oil prices wobble around certain price level, refiners are able to charge the highest price, even though their feedstock price may have fallen. The impact on refining margins can be dramatic. That is why both Valero Energy Corp. (NYSE: VLO) and Phillips 66 (NYSE: PSX) have posted new highs this week. Other U.S. refiners are very near new highs as well.