US gasoline inventories plunge as demand outstrips storm-battered supply

US gasoline inventories moved sharply lower for a second week in the week ended March 5, Energy Information Administration data showed March 10, as rising demand stressed winter-storm blunted production.

Total US gasoline stocks fell 11.87 million barrels last week to 231.6 million barrels, driving inventories more than 6% behind the five-year average.

Gasoline stocks tightened in all regions, but the draw was concentrated on the high-demand US Atlantic Coast, where stocks retreated 7.49 million barrels to 63.69 million barrels. The draw pushed USAC stocks 2.5% below the five-year average, eliminating a surplus that had persisted since late January. US Gulf Coast inventories moved 3.66 million barrels lower to 76.19 million barrels, falling more than 8% behind average.

The draw comes as implied demand for gasoline jumped more than 7% on the week to 8.73 million b/d, the strongest since early November.

The easing of pandemic lockdowns in several states coupled with the onset of warmer weather is likely contributing to an increase in road travel. Apple Mobility data shows US driving activity climbed nearly 5 percentage points to 118.6% of the level in January 2020, the highest since the week ended October 30 and roughly at par with year-ago levels.

Against this tide of rising demand, a storm-battered US refinery complex continued to produce significantly less gasoline. Total output jumped 700,000 b/d to 9 million b/d last week, putting it roughly at par with levels seen the week before severe winter weather took up to 4 million b/d of refinery capacity offline in mid-February, but the four-week moving average was down around 2% from pre-storm levels.

But even prestorm US gasoline production was around 7% behind year-ago levels.

Total refinery net crude inputs surged to 12.31 million b/d, up more than 24% from the week prior, but still nearly 17% below prestorm levels. Refinery utilization was up 13 percentage points at 69%, of total capacity.

This disconnect between rising gasoline demand and stagnant refinery production has contributed to widened crack spreads. The ICE New York Harbor RBOB crack versus Brent averaged $17.50/b last week and has since climbed to levels last seen in August 2017.

These wide spreads have in turn drawn a flurry of imports. According to Kpler ship tracking data, gasoline imports into the USAC are expected to hit 7.34 million barrels the week beginning March 8, and 5.78 million barrels the following week. EIA data shows USAC imports at around 3 million barrels for the week ended March 5.

While the bulk of the refineries impacted by the storm have seen at least partial restarts, at least six facilities were still operating at below full capacity last week, and at least four facilities comprising a combined 800,000 b/d of capacity had no estimated full restart date. Reduced runs are expected to linger at some large facilities, including Motiva’s 607,000 b/d and Total’s 225,500 b/d Port Arthur refineries, into mid-March.

Refinery headwinds coupled with resurgent production resulted in a second week of large US crude inventory builds. Total commercial crude stocks climbed 13.8 million barrels to 498.4 million barrels, pushing stocks 6% above the five-year average and opening the widest surplus since mid-January.

Total crude production climbed 900,000 b/d to 10.9 million b/d, putting it back at prestorm levels.

In total, the February deep freeze is likely to cost roughly 70 million barrels in lost refinery runs, according to S&P Global Platts Analytics, considerably overshadowing aggregate crude production losses of 20 million-25 million barrels.

Source: Platts