Gasoline Demand picking up

[dan_s]

Refiners are beginning to ramp up for the summer driving season. Summer blends require more crude oil.

Phil Flynn on March 23, 2017:

Gasoline inventories fell for the fifth straight week and it was by a sizable 2.8 million barrels. While the drop was not nearly as large as the American Petroleum report suggested, it still suggests that gas inventories will continue to fall in the coming weeks.

The industry must draw down winter grade gasoline by exports and discounting production. They then must get geared up for the summertime blend. The increase in refinery runs that put U.S. refiners back to 87.4% of capacity is leading to expectations that soon we will see U.S. oil inventories start to fall. [IEA's Oil Market Report (3/15/2017) forecasts that refiners will increase draws from crude oil storage by 1.9 million barrels per day from Q1 to Q2.]

Supplies at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, rose 1.97 million barrel and while we did see a big slowdown in OPEC imports, we saw Canadian imports offset that by a big margin. Yet gasoline starts becoming the seasonal driver more so than crude supply and distillate. We should see more draws in the coming weeks and more increases in refinery runs.

Despite all the rumors of demand destruction in gasoline, the truth is that we should see demand snap back to record levels as an improving economy and better job picture will jack up those miles driven. This Memorial Day we could get close to a record for holiday driving and that should kick off a summer of record demand. Large trucks and large cars will dominate the road as low prices have the thoughts of fuel efficiency go to the back of the minds of drivers that will purchase record number of new vehicles. U.S. auto sales are expected to scale a record high of 17.6 million vehicles in 2017, according to JD Power.