The EIA (U.S. Energy Information Administration) reported that gasoline inventories increased by 1.7 million barrels to ~227.5 MMbbls (million barrels) in the week ended April 24. Analysts had expected inventories to increase by 900,000 barrels.
When inventories increase more than expected, it’s bearish for gasoline prices. This negatively affects the margins of refiners such as Valero Energy (VLO), which makes up 1.1% of the iShares Global Energy ETF (IXC). Lower gas prices also negatively affect MLPs such as Northern Tier Energy (NTI), Calumet Specialty Products Partners (CLMT), and CVR Refining (CVRR).
The above graph shows that weekly gasoline inventories remain above the five-year range.
Factors that affected inventories last week
Gasoline production fell from ~9.76 MMbpd (million barrels per day) in the week of April 17 to ~9.37 MMbpd last week. Supplied gasoline products averaged more than 8.9 MMbpd over the last four weeks. This is 2.6% higher than in the same period last year.
Gasoline demand also fell from ~9.18 MMbpd to ~8.9 MMbpd last week.
While both gasoline production and demand decreased last week, a decrease in demand seems to have had a more pronounced effect on inventories than changes in production. 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: An important fuel
Gasoline is an important fuel, mainly used for transportation. Gasoline inventories provide a handy snapshot of gasoline demand and supply trends.