By JENNY GROSS
LONDON -- European refiners are seeing gasoline profits fall, and analysts say they're likely to continue to slide because of weak demand for the fuel in Europe and the US.
Profits on gasoline in Northwest Europe have nearly halved to $10.73/ton from $19.23/ton, the lowest level in more than two months, according to calculations by Dow Jones Newswires.
Even this year's peak driving season in the US, a period when producing gasoline is usually most profitable for refiners, demand is down, analysts said.
This week, the US Energy Information Administration reported that gasoline stockpiles rose 4.1 million bbl, the biggest weekly rise since Dec. 2, 2011.
"The downside fits with our general perception that the motor fuel's crack has been over valued recently and is likely to wane further as refiners have adjusted themselves for the remainder of the peak driving season, while the demand outlook remains bleak," JBC Energy said in a note this week.
Massimo Vacca, head of investor relations at Saras, an Italian refiner, said the recent rise in crude prices and increase in gasoline stocks had contributed to the squeeze on refiners' profits.
"The rebounding margin was not driven by strength in demand, but [rather] a drop in [crude oil] prices," Mr. Vacca said. "Now that prices have stopped dropping, product prices have kept going down because there's no demand."
He said that as older vehicles are gradually replaced on the US roads with newer more fuel-efficient cars, there is less overall consumption.
In addition, the overall economic backdrop in the US and Europe is uncertain, and people tend to rein in spending during these times.
US economic growth pulled back further during the second quarter of the year as consumer spending slowed, according to data released Friday.
Dow Jones Newswires