US gasoline prices have lagged crude's rally to record highs, and the major reason has been a perceived oversupply of gasoline inventories in the US. Refinery maintenance, possibly pushed forward and/or extended due to weak gasoline refining margins, could reduce the surplus quickly.
The EIA reported a 3.5 million barrel drop in total US gasoline inventories during the week ending March 14. However, stocks remain 22.9 million above the five-year average. A sharp drop in refinery utilization trimmed gasoline production in the US Gulf Coast and Midwest, causing suppliers to draw down inventories.
Refinery utilization fell 1.2 percentage points to 83.8%, pushing down finished gasoline production to 8.678 million b/d from 9.030 million b/d. Overall refining yields dropped to 99.2% from 101.95% the previous week, a sign that secondary units have been taken down for maintenance. In addition, the gasoline yield fell to 59.3% from 60.9%.
Despite the outcry over high retail gasoline prices, gasoline refining margins have been tiny, to say the least. The April NYMEX RBOB crack fell to minus $0.50/barrel Monday, before edging up to plus $2.30/b. So it's no surprise that refiners would seek to minimize gasoline production in favor of distillate, where the April crack spread was more than plus $22/b.
One sign that there could be more sharp draws reported by the EIA over the next few weeks. For the past two years, EIA's weekly estimates of gasoline inventories have soared far above the API's during February, before returning to near-parity by the end of March. This year the difference between the two reached 16 million barrels as of March 7, greater than last year's largest difference of 10 million barrels before the two levels converged.
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