Last week, gasoline inventories declined by 2.3 MMBbls, to 210 million barrels—the lowest level in 2014, according to the EIA. The EIA described this level as being in the middle of the five-year average range.
Supplies were expected to drop by 1.4 MMBbls. The greater-than-anticipated decline in gasoline inventories implies that analysts might have underestimated gasoline demand last week or overestimated supply.
Indeed, gasoline demand was higher last week on account of Labor Day Weekend.
Gasoline production and prices
Production last week of 9.6 million barrels per day (or bpd) was higher by 0.1 million bpd on a weekly basis. The more-than-expected gasoline draw was bullish for gasoline prices.
Gasoline prices affect the margins of refineries like Valero Energy (VLO), Phillips 66 (PSX), Marathon Energy (MPC), and Tesoro Corp. (TSO). Most of these companies are components of the Energy Select Sector SPDR ETF (XLE).
Gasoline demand should lower in the months to come
With the close of the summer driving season, U.S. motorists have reduced their gasoline demand.
Refineries had been increasing their gasoline output levels throughout the summer driving season in anticipation of higher demand. However, as the driving season has ended, refineries anticipate demand will decline even as they enter into planned maintenance.
Outlook for gasoline
The EIA reports that global gasoline consumption is outpacing diesel growth in 2014. Also, The International Energy Agency (or IEA) estimates that total non-OECD (Organization for Economic Cooperation and Development) gasoline consumption growth was 3.8% in the first half of 2014—significantly higher than the consumption growth for distillate (including diesel fuel), which grew 0.7% over the same period.
Continue to the following part of this series to read about changes in distillate inventories last week.