Refinery Maintenance Contributes to Tighter U.S. Gasoline Markets
WASHINGTON, D.C. --- One major reason why gasoline markets have tightened over the past several weeks is the reduction in gasoline production. This stems from refinery maintenance and unplanned outages, according to a report from the Energy Department's Energy Information Administration (EIA).
Crude oil inputs have started to rise recently, but continue to remain below 15 million barrels per day, the EIA reported. Crude oil inputs last March also dropped because some refineries were still recovering from Hurricanes Katrina and Rita. Thus, a better comparison might be March 2005, when crude oil inputs averaged 15.2 million barrels per day, significantly higher than levels seen over the past several weeks.
Nevertheless, on a moving four-week average basis, crude oil inputs began increasing a few weeks ago. Should this continue, crude oil inputs could be above 15 million barrels per day.
Still, crude oil inputs will have to be sustained well above 15 million barrels per day this spring and summer to help keep gasoline production high enough to meet expected demand increases, the EIA said. Another reason why gasoline markets have tightened, causing gasoline prices to rise, is a reduction in total gasoline imports (finished gasoline plus blending components).
Market conditions will also be influenced by crude oil inputs to refineries and total gasoline imports. Market analysts are closely monitoring these factors, along with gasoline inventories and demand, to forecast which way gasoline prices might head. Until domestic gasoline production and imports both increase substantially, retail prices are not likely to see a noticeable downturn.
"The good news is that supplies may have begun to increase," the EIA said. "How quickly they increase relative to expected demand increases will likely determine when prices may start heading lower."