The EIA (U.S. Energy Information Administration) reported that gasoline inventories rose by 0.5 MMbbls (million barrels) to 217.8 MMbbls in the week to June 12. Analysts had expected inventories to fall by 800,000 barrels or 0.8 MMbbls.
The above graph shows that weekly gasoline inventories are now inside the five-year range after spending all of 2015 outside the range.
What does this mean?
When gasoline inventories rise, it’s bearish for gasoline prices. It’s also negative for refiners’ margins like Marathon Petroleum (MPC) and Tesoro (TSO). They account for ~2.3 % of the iShares U.S. Energy ETF (IYE).
It’s also negative for MLPs (master limited partnerships) like MPLX LP (MPLX) and Tesoro Logistics LP (TLLP) that carry refined products, as well as refining MLPs like Northern Tier Energy (NTI), Calumet Specialty Products Partners (CLMT), and CVR Refining (CVRR).
Tesoro Logistics accounts for ~2.5% of the Alerian MLP ETF (AMLP).
Usually, if the actual rise is more than what analysts expected, it implies that demand was less than anticipated or that supplies were more than anticipated. This is bearish for gasoline prices. However, if the rise is less than what analysts expected, it implies that demand was more than anticipated or that supplies were less than anticipated. This is bullish for gasoline prices.
Gasoline is an important fuel, used mainly for transportation. Gasoline demand also drives crude oil demand and crude oil prices. So, energy investors watch gasoline inventories closely. We’ll take a look at last week’s gasoline demand and supply trends in the following part of this series.