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Weak U.S. gasoline demand compounds pressure on oil ahead of OPEC+ meet

NEW YORK (Reuters)—The U.S. gasoline market is flashing signs of weakness at the start of summer driving season, a time it generally picks up strongly, and analysts say this clouds the picture for oil demand ahead of the OPEC+ group policy meeting that kicked off this weekend.

U.S. gasoline demand fell about 2% week-over-week to 9.15 MMbpd, even as refiners ramped up to their highest run-rate in nine months, government data for the week ended May 24 showed. That led to a surprise jump in gasoline inventories, which pushed futures prices for the fuel RBc1 to a three-month low on Thursday.

The difference between gasoline futures and U.S. oil futures RBc1-CLc1, a measure of refiners' margins on gasoline, also slipped to a three-month low on Thursday. Softer refining margins could lead to run cuts at refineries, Citi analysts wrote on Friday. "Weak refined product markets could drive the entire complex lower, including for crude," they wrote.

U.S. gasoline consumption represents roughly 10% of global oil demand. Rising oil stocks over the past few months due to soft fuel demand had already strengthened the case for OPEC+ to extend supply cuts at the meeting, delegates and analysts said.

"OPEC+ is looking at all incoming data points, so they will take note of the latest developments," UBS analyst Giovanni Staunovo said on Friday.

Weakness in U.S. gasoline demand is likely due to a mix of factors, including a record number of travelers choosing to fly over the holiday weekend instead of driving long distances, Staunovo said. More fuel-efficient cars and electric vehicles also cut gasoline usage, he added.

"There were almost 3 MM people at the airport last Saturday, a new record high. So despite many on the road, the miles driven might have been lower than a year ago and eventually more-efficient cars weighed on demand," Staunovo noted.

The market structure for U.S. gasoline futures flipped briefly to a 'contango' on Friday RBc1-RBc2, a structure where gasoline available immediately is priced lower compared to deliveries later in the future.

A contango for U.S. gasoline in May is rare, last recorded in 2021. It is a sign of how weak the market is and a gasoline trader called it a signal to "store now, sell later."

(Reporting by Shariq Khan in New York; Additional reporting by Anushree Mukherjee in Bengaluru; Editing by Liz Hampton and David Gregorio)

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