Excess supply of gasoline coupled with slow demand has pressured refiners margins, Reuters reports, noting refining margins for the fuel in the United States sank to US$45.70 a barrel yesterday.
The drop follows the fourth weekly increase in gasoline inventories in the U.S., all of them quite hefty, leading to an all-time high of gasoline supplies, at 259.6 million barrels as of January 18.
Over the last four weeks, the Energy Information Administration reported gasoline inventory builds reaching a combined 26.6 million barrels.
However, the United States is not the only large gasoline hub where inventories are rising as demand remains sluggish. According to the Reuters report, inventories in the Netherlands, Japan, and Singapore are also at multi-year highs, with the annual increase in their combined level at 21 million barrels, data from consultants FGE has shown.
The U.S. shale oil boom has yielded predominantly light crude, from which gasoline is made, so the most recent surge in production has resulted in more production of the light fuel. However, U.S. refiners have also upped their gasoline output levels as they increase distillate fuel production as well, as it fetches higher margins.
“Overproduction of gasoline ensued and now you’re in a situation where in various parts of the world gasoline cracks are basically zero or negative,” Wood Mackenzie analyst Zachary Rogers told Reuters.
The prospects for gasoline demand don’t seem too bright, either. Worry about a global economic slowdown persist despite reports from Asia that governments are preparing for stimulus measures. Also, Wall Street seems to be unanimous in its expectation of a slowdown during the so-called “late-cycle” stage that precedes a recession.
Things are not much different in Europe: Reuters reports that gasoline margins are dropping there as well, hitting a seven-year low of a negative US$3.80 a barrel this week. Europe’s economy has been struggling with the aftereffects of the 2008 crisis a lot longer than other regions, and success has been only partial.
By Irina Slav for Oilprice.com
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