US gasoline margins hit 1-year low on oversupply fears

NEW YORK (Reuters) -- US gasoline margins fell by more than 11% early on Friday, hitting one-year lows as record inventories and signs of weakening demand dampen expectations and upend trade flows.

The sharp drop in gasoline margins came as government data showed US gasoline inventories reached record highs amid weakening demand at the pump. Trading houses such as Noble and Mercuria have meanwhile booked cargoes for a highly unusual route away from the gasoline-hungry US East Coast to West Africa.

The US gasoline crack spread, a key indicator of refining margins, fell 11.2% to a one-year low of $9.50 cents a gallon in early trading on the New York Mercantile Exchange.

US gasoline demand growth will be lackluster this year largely because the United States reached full employment last year, Harry Tchilinguirian, BNP Paribas' global head of commodity markets strategy, told the Reuters Global Oil Forum on Friday.

"Given that we see US refiners still producing at record levels this summer, and that the demand backdrop is lackluster in terms of growth, we would stay away from buying summer gasoline cracks," he said.

Gasoline stocks rose by 2.8 million barrels last week, pushing inventories of the fuel to a fresh record 259 million barrels, according to the latest data from the US Energy Information Administration. US East Coast gasoline inventories have been at record high levels for weeks.

Inventories of gasoline have surged 10% since the end of 2016, EIA data showed.

Overall demand for gasoline in the last four weeks was down 5.3% year-on-year at 8.43 MMbpd.

The United States consumed more than 9 MMbpd of gasoline in 2016, making up nearly 10% of global oil demand. The US East Coast accounts for over a third of the national consumption.

Reporting by Jarrett Renshaw; Editing by Paul Simao and Meredith Mazzilli

Related News

From the Archive