Gasoline Inventories Returned to Downtrend Last Week

The EIA (U.S. Energy Information Administration) reported that gasoline inventories decreased by 2.1 million barrels to ~228 MMbbls (million barrels) in the week ended April 10. Analysts had expected inventories to decline by 750,000 barrels.

When inventories decrease more than expected, it’s bullish for gasoline prices. This is good for the margins of refiners such as Tesoro (TSO), which makes up 2.2% of the Energy Select Sector SPDR ETF (XLE).

Bullish gasoline prices can also be positive for refineries’ MLP subsidiaries that carry refined products. TSO’s MLP subsidiary is Tesoro Logistics (TLLP). Other MLP subsidiaries include Phillips 66 Partners (PSXP) and Shell Midstream Partners (SHLX).

The above graph shows that weekly gasoline inventories remain outside the five-year range despite the draw in inventories reported on Wednesday.

Gasoline production increased from ~9.14 MMbpd (million barrels per day) to ~9.25 MMbpd last week. Gasoline products supplied averaged 8.9 MMbpd over the last four weeks. This was 0.7 % higher than in the same period last year.

Gasoline demand increased from ~8.61 MMbpd to ~8.91 MMbpd  last week.

While both production and demand increased last week, demand seems to have had a more pronounced effect on inventories than production as far as the inventory draw was concerned. Inventories are also impacted by changes in trade flows.

In the next part of this series, we’ll discuss last week’s changes in distillate inventories.

Gasoline is an important fuel, mainly used for transportation. Gasoline inventories provide a handy snapshot of gasoline demand and supply trends.