Bloomberg - Weak Summer Gasoline Demand Is Eroding US Refining Margins

July 21, 2022 – Bloomberg News

Weak Summer Gasoline Demand Is Eroding US Refining Margins

By Chunzi Xu

Seasonally low demand and weaker crude have driven gasoline futures to their lowest level in more than three months to around $3.12 a gallon. The futures benchmark is the pricing basis for wholesale and retail gasoline in the US, and its decline signals pump prices have more room to fall.

Weaker margins have prompted refiners to dial back on gasoline production while keeping overall operation rates elevated, in part to chase returns from making diesel, which is currently almost 60% more profitable. Gasoline yield – the percentage of crude that’s turned into the fuel – averaged 57.7% in the four weeks ending July 15, compared with 60.6% during the same period last year.

But margins are still historically high. Gasoline cracks have merely gone “from stratospheric to very good,” said John Auers, managing director at RBN Energy, in a phone interview. US refiners have the advantage of lower operating costs in the form of cheaper natural gas than their European counterparts, which provides a floor for their margins, Auers added.

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