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American refiners are planning lower refinery utilization rates after producing gasoline at high rates amid softening demand, Reuters reports.
In the past month, U.S. national average gasoline prices have dropped to $3.418 from $3.746, with prices continuing to gradually decline, according to AAA.
While targeting utilization rates in the low-90s, after the bulk of the year saw a high-90s rate, refiners say output will remain high enough to ensure that gas prices remain on their lower track due to softening seasonal demand.
“Guidance has been generally within our expectations of seasonally softer levels due to the pullback in gasoline demand,” Reuters quoted Matthew Blair, head of refiners, chemicals & renewable fuels research at investment firm Tudor, Pickering, Holt & Co., as saying. The refiners’ take on softening demand is in line with the Energy Information Administration’s (EIA) inventory data last week showing a top in gasoline demand to 8.7 million bpd from 8.86 million bpd. Gasoline inventories are now 8.2% higher than a year ago and 2% higher than the five-year season average.
Additionally, the EIA showed a 0.2% drop in refinery utilization to 85.4%.
For now, U.S. refiners are riding high on the Q3 earnings season, which showed stronger demand. Back at the pump, the U.S. has seen seven consecutive weeks of price drops, with GasBuddy showing a 7-cent drop from a week ago and a nearly 41-cent drop from a year ago, while the national average price of diesel has fallen 6.6 cents in the past week and 93 cents in a year.
“With cooler weather comes cooler gasoline prices,” said GasBuddy’s Patrick De Haan, adding that prices will continue to fall “virtually coast to coast” as we near Thanksgiving.
“The decline is likely to continue for at least another couple of weeks,” De Haan said.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com