Gasoline Crack Spreads Expected to Ease as Summer Demand Wanes

Gasoline cracks to ease

The gasoline market has been strong for much of the summer, trading to levels seen last summer – a time when there was plenty of uncertainty over Russian crude and product flows. The strength in the market had been partly due to low US inventories, which have been well below the five-year average. In addition, there were a number of refinery outages over the summer, whilst hot weather in parts of Europe meant that refiners had to reduce run rates, which hit gasoline output.

US gasoline demand also held up well through much of the second quarter, with the four-week rolling average at levels last seen back in 2019. However, since early July, whilst demand has remained above year-ago levels, it has fallen below levels seen in 2021. Gasoline cracks have come under significant pressure more recently, coinciding with the end of the driving season.

Obviously, with the US driving season now behind us, demand is likely to continue to trend lower, which should mean we start to see US gasoline inventories moving higher, particularly once seasonal refinery maintenance is complete. However, much will depend on how the rest of the US hurricane season develops. Seasonally weaker demand, combined with refiners processing lighter grades of crude (due to tightness in the medium sour market), suggests that there is limited upside in gasoline cracks in the coming months.

Meanwhile, gasoline inventories in the ARA region are comfortable, remaining near five-year highs, suggesting that there will be little upward pressure on cracks driven by European dynamics.

 

 

US gasoline inventories to rise as demand edges lower

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