Last week's unofficial start to the summer driving season was ushered in by US refiners trimming gasoline production to the lowest level for any May week in five years because of unseasonably low demand and prices.
Refiners slashed finished gasoline output by 7.3pc to 9.037mn b/d during the week ended 30 May, marking an eight-month low at a time when production is typically rising ahead of rising summer consumption. Instead, rates were the lowest for any May week since 2020 at the start of the Covid-19 pandemic, according to US Energy Information Administration (EIA) data.
US gasoline demand as measured by product supplied similarly fell below any May week in five years to 8.263mn b/d, shrinking by 13pc from the prior week to four-month lows.
US gasoline consumption has yet to see an upward jolt from unseasonably low prices.
Prices for Colonial pipeline CBOB — the most liquid gasoline grade in the US Gulf coast's spot market — were down by 28.61¢/USG to an average of $1.90/USG during the 10 trading days from 21 May-4 June compared to the same stretch last year. On 30 May, Colonial CBOB prices neared eight-week lows at $1.85/USG. At the New York Harbor, Buckeye pipeline RBOB gasoline prices similarly lagged year-earlier levels by 35.29¢/USG at $2.09/USG across that same 10-session period.
Nymex futures weigh on prices
US gasoline prices have largely been pressured by low Nymex RBOB futures, which are the basis for most spot trade. Those futures prices continue to fall with prompt-month prices holding above upcoming months. On Wednesday, front-month July Nymex RBOB futures settled at $2.03/USG, while August and September Nymex futures settled at $2.02/USG and $1.98/USG, respectively.
Despite the recent cuts to output, US gasoline inventories were roughly in line with year-earlier levels at 228.3mn bl last week, down by 1.1pc on the year. But low production rates and narrow arbitrage opportunities have the potential to tighten supplies. Domestic and transatlantic arbitrage economics to the US northeast have recently been pressured by backwardation in New York Harbor gasoline markets as prompt prices remain higher than prices along the forward curve. Gasoline stocks in the US central Atlantic region — which includes New York and New Jersey — hit five-month lows in late May.
Domestic gasoline consumption, though tempered in recent weeks, could tick higher across the summer. US finished gasoline products supplied rose by 2.3pc on average from May to July last year, peaking at an eight-month high of 9.456mn b/d in the week ended 19 July 2024.
