Analysis: EIA: Gulf Coast Gasoline Stocks Dwindle Rapidly

VIENNA (DTN) – Gasoline inventories on the U.S. Gulf Coast fell by 900,000 bbl to an eight-year-low 75.5 million bbl last week, U.S. Energy Information Administration data released Wednesday (7/15) showed.

 Stockpiles have dwindled nationwide much more rapidly than in previous years, and nowhere faster than in the country’s main refining and export hub.

Total gasoline stocks in PADD 3 have, over the last six weeks alone, shrunk by 5.81 million bbl, or at an average rate of 138,000 bpd, twice as fast as the typical seasonal pace. Higher exports, rising domestic demand and refiners maximizing other product yields at the expense of gasoline output continued to draw down inventories, which started at already unusually low levels for the time of year.

In fact, during April and the first half of May, a period when refiners ramp up operations to meet peak driving demand months later, thus leading to a gasoline overhang and rising inventories, stockpiles plummeted in an unprecedented fashion. During the reference period, gasoline inventories in the region fell at an average pace of 208,000 bpd.

Refined product and crude oil exports have, along with the Middle East supply disruption, eased from recent record highs. Given the recent escalation in the region, however, global fuels supply may now face renewed headwinds, ensuring a continuation of the very trends that have led to the rapid decline in gasoline inventories.

Current inventory levels on the Gulf Coast are now nearly 11% below their five-year seasonal average, more than 9% below the ten-year average, and trailing year-ago levels by almost 12%. While still enough to ensure operations, the scale of inventory depletion is conducive to margins along the downstream supply chain, keeping the gap between prices at the pump and crude oil prices unusually wide.

However, inventories are likely to shrink further as we head into main hurricane season, carrying an elevated risk of supply shortages and price spikes.