By restricting crude processing and focusing on making gasoline, US petroleum refiners have made progress in reducing excess stocks of middle distillates such as diesel and heating oil.

But in the first half of October the strategy was challenged by softening domestic gasoline consumption, forcing them to make even deeper cuts in crude processing in an effort to stay on track.

The volume of gasoline supplied to domestic users fell in both the two most recent weeks, interrupting the previous recovery, according to estimates from the US Energy Information Administration (EIA).

Gasoline supplied to domestic users is now 9 percent below the previous five-year average, from a deficit of 4 percent at the start of the month.

In a sign of weak consumption, inventories increased by 2 million barrels last week, the largest one-week increase since the end of May, reversing the previous downward trend.

Gasoline refining margins have fallen to $7 per barrel, from $9 earlier in the month, reversing the previous upward trend, based on futures prices for deliveries in December.

Refiners have attempted to limit the build-up in gasoline inventories by making even deeper reductions in crude throughput and gasoline production. This strategy has proved broadly successful, bringing gasoline stocks down to the five-year average, and gradually reducing the surplus of both crude and distillates.

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27th October 2020