US gasoline stock leftover after warm winter
By Jessica Resnick-Ault
NEW YORK, July 13 (Reuters) – US gasoline and distillate stocks surged unexpectedly last week, data showed on Wednesday, crimping margins for refiners at the height of summer driving season, a time when they generally enjoy healthy demand and profits.
Almost two months into the start of a summer when Americans were expected to take to the road at record rates, some 1.2 million barrels of gasoline landed in storage tanks last week, the Energy Information Administration said on Wednesday.
That shocked the oil market after analysts had forecast a 432,000-barrel drop. It was the fourth inflow since the end of May, the official beginning of summer, and it took inventories for this time of year to their highest in at least a quarter of a century.
Distillate stockpiles, which include diesel and heating oil, rose 4.1 million barrels, said the EIA. That was the largest build since early January, far surpassing expectations for a 256,000-barrel increase. The diesel crack spread, a measure of profit for refining crude into distillate fuels, touched a two-month low of $13.08 a barrel. Other measures of refiners’ profits also retreated.
U.S. crude fell $2.05 to $44.75 a barrel, and the overhang in product supply could pressure crude prices even more.
The build paints a bleak picture for year-end demand for diesel when combined with slow demand in Europe and rising Chinese stockpiles. Diesel usually dominates products markets in the autumn when people begin to stock up on heating oil.
“There’s got to be a reckoning that we only have a few weeks left of peak gasoline demand, and then we hit a shoulder season,” said Michael Cohen, head of energy and commodities research at Barclays in New York.
For the past three months, the EIA has reduced its outlook for oil demand growth for 2016, trimming it most recently on Tuesday to 160,000 barrels a day.
“Growth and use is less than what has been expected,” said Phil Verleger, a veteran oileconomist and independent consultant.
“I think everyone became a little excessively excited about the growth of demand in May because they kept seeing the large (demand) numbers that were overstated, so they kept making gasoline, and importers scheduled ships to come here, and hedged it, and now it’s showing up, and there are fewer drivers buying.”
The overhang in gasoline supply left over from a warm winter is particularly noticible on the U.S. East Coast where stockpiles are above five-year averages, and there are fewer opportunities to export excess product, said Mark Routt, chief economist for the Americas at KBC Advanced Technology in Houston.
In other regions, particularly the Gulf Coast, excess product may be exported in coming weeks, he said.
(Reporting By Jessica Resnick-Ault; Editing by Marguerita Choy and David Gregorio)