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Rise in Gasoline Demand Unable to Pull Back Inventory Levels

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Gasoline inventories

In its Weekly Petroleum Status Report released on December 30, 2015, the EIA (U.S. Energy Information Administration) stated that US gasoline inventories rose by ~0.9 MMbbls (million barrels) to settle at 221.4 MMbbls for the week ended December 25. The current gasoline stocks were 3.3% more than they were in the same period of the last year.

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Gasoline production and demand

US gasoline production rose by 0.57 MMbpd (million barrels per day) to settle at 9.9 MMbpd for the week ended December 25, 2015. The present gasoline production levels are 2.6% higher than gasoline production in the corresponding period last year.

For the week ended December 25, US gasoline imports rose by 0.15 MMbpd to settle at 0.48 MMbpd. Gasoline imports were 42.2% or 0.36 MMbpd lower compared to the corresponding period last year.

US gasoline demand was 9.3 MMbpd for the week ended December 25. Gasoline demand rose by ~0.21 MMbpd from the previous week ended December 18. The current gasoline demand is ~2.3% lower than in the corresponding period last year.

Analysis

Gasoline production and imports rose in the last week on expectations that demand will increase due to more road trips in the eve of the Christmas and New Year vacations. Demand slightly rose by 0.21 MMbpd for the week ended December 25, whereas production and imports collectively rose by 0.93 MMbpd for the week ended December 25.

Production and imports rose by 0.72 MMbpd more than consumption levels in the last week ended December 25. So, gasoline inventories rose by 0.9 MMbbls in the last week.

The rise in gasoline demand is bullish for gasoline prices, but a rise in gasoline inventories put pressure on prices. An increase in gasoline demand and production levels could raise the revenues of refineries due to long-term lower crude oil prices, raising the profitability of refineries such as Marathon Petroleum (MPC), Phillips 66 (PSX), Western Refining (WNR), Valero Energy (VLO), HollyFrontier (HFC), and Tesoro (TSO).

Tesoro accounts 3.6% of the Energy Select Sector SPDR (XLE).

Find more updates on distillate fuels in the next part of this series.

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