We are getting into the peak summer driving season and gasoline demand has been hitting all-time highs. You might think that inventories would be drawing down and that the U.S. would need to import more gasoline and gasoline blending components. But not so. U.S. refineries are cranking out the products. Gasoline stocks are up 10% from a year ago—15 million barrels (MMbbl) higher than the top of the five-year range—and last week gasoline inventories made a contra-seasonal move upward, increasing by 1.4 MMbbl. Net exports for the first quarter were up almost five times the same period in 2015. But what does all this mean for refined product markets in general, and gasoline balances in particular? Today, we examine the state of U.S. petroleum product markets.
The upswing in U.S. gasoline demand is nothing new. RBN blogged about it this time last year in King of the Road (Again) and covered issues related to delivering gasoline, diesel and jet fuel to Northeast markets a few weeks back in Move It on Over. In the Energy Information Administration’s (EIA) June 2016 Short-Term Energy Outlook, gasoline consumption this summer was projected to average 9.5 MMb/d, a solid 1.9% higher than the summer of 2015, which was a strong demand season itself. What really stands out, though, is that even with high domestic demand for gasoline, net U.S. export volumes remain impressive. Figure 1 shows EIA net exports of gasoline (exports less imports of finished motor gasoline and motor gasoline blending components) and net exports of distillates (exports less imports of distillate fuel oil and kerosene-type jet fuel). The graph on the left is the total of net gasoline and distillate exports, showing the huge shift of the U.S. from a net importer of about 1.5 MMb/d in 2006 to a net exporter of about 1.2 MMb/d over the past six months. The graph on the right in Figure 1 focuses on the 2012-16 timeframe and splits net exports into gasoline (green line) and distillates (brown line). Both are still trending higher, but the big news is gasoline, which has moved well into the net export category since late 2015 (purple oval).