Have Fuel Volumes Hit Bottom?

COVID-19-related decline appears to ease, with growth anticipated this summer: Raymond James
Photographs: Shutterstock

ST. PETERSBURG, Fla. — New fuel volume figures suggest the massive demand destruction triggered by the COVID-19 pandemic may be leveling off.

In an April 23 research note, Raymond James cited data from Oil Price Information Service (OPIS) showing that national fuel volumes for the week ending April 18 were off about 44%. OPIS bases volume figures on its survey of 15,000 fueling sites across the United States; this most recent survey had about 50% of sites reporting.

Earlier OPIS figures show demand down year over year about 49% for the week ending April 11, off 48% for the week ending April 4 and down 47% for the week ending March 28.

Analysts with Raymond James, which covers public c-store chains such as Murphy USA, Casey’s General Stores and Alimentation Couche-Tard, said, “Positively, it appears we may have reached the bottom for fuel volume pressure, with the April 18 preliminary report indicating fuel volumes are up [about] 8% vs. the prior week.

“Importantly, the recent trends over first three weeks of April are better than our prior expectations,” the research note said, referring to an anticipated year-over-year decline of about 60%.

“Admittedly, trends can still change very quickly and the question still remains how fast volumes recover once the ‘stay at home’ orders are lifted,” the analysts said.

Tom Kloza, global head of energy analysis for OPIS, said volumes appeared to be rising week over week but questioned whether they have hit = bottom. “Data is preliminary, but OPIS Volume Survey is showing an uptick of about 7.2% for actual station sale in week ending April 18. Still down about 44% from same time last year. Premature to say we've bottomed since millions of folks still getting furloughed each week," he said in an April 23 tweet.

Unemployment numbers released by the U.S. Department of Labor showed 4.4 million people claimed benefits the previous week, which would add up to more than 26 million people unemployed within the space of five weeks. This essentially wiped out all the job gains in the decade since the Great Recession, NPR reported.

That said, the c-store industry “continues to hold up better than other areas of retail during the COVID-19 crisis,” said analysts with Raymond James, St. Petersburg, Fla. They pointed out that Murphy USA, Casey’s and Couche-Tard are each seeing year-to-date declines of about 5%, compared to a 15% year-to-date decline for the S&P 500. All have benefited from higher-than-average fuel margins. Some, such as Casey’s, which has 56% of its stores in towns with fewer than 5,000 people, also have enjoyed geographic advantages.

After a decline in April, Raymond James now expects sequential improvements in fuel volumes in May, June and July. Citing OPIS data, the analysts said the largest declines year over year have been in the West and Northeast, while the Southeast and Southwest have seen the smallest.

Meanwhile, the massive drop in oil prices has provided “a sizable benefit” to fuel margins. Year over year, fuel margin improvements have helped offset the drop in miles driven during the pandemic, according to Raymond James. April-to-date margins for regular grade were up about 340% nationally compared to April 2019, with the strongest gains in the Midwest.

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