In what might be seen as a reversal of fortunes for oil and gasoline, market prices appear to have turned the corner with gasoline emerging from one of its greatest slumps in a dozen years. Wednesday’s U.S. Energy Department’s weekly petroleum status report confirmed that the surplus seen just weeks ago has all but vanished due to a sharp drop in pump prices which have slowed traditional European imports while exports to Latin America are on the rise.
Even with the ongoing debate over whether North American demand for fuel will set another record this summer, the impressive volumes of crude processed by U.S refineries, taking advantage of discounted oil, has discouraged outside sources of supply and allowed for that excess production to be sold elsewhere. Indeed while the U.S imported 450,000 barrels of gasoline per day in the four week up to July 14, 2016, this year that number has been more than halved this year for the same time period to 210,000 bp/d. At the same time exports are up 229,000 bp/d to such destinations as Mexico, Canada and as far away as China.
The shift in America’s net trade position is the main reason behind the gasoline surplus which had built up in previous months and caused a drag on gas prices up to now. As a measure of what might be expected in the weeks ahead as far as pump prices are concerned, the amount of inventory in fuel stocks in the U.S stood at 25 days in 2016. Today they are now 24 days of implied domestic consumption and are likely to fall further over the next two weeks. Should this trend of diverting U.S bound gasoline tankers from Europe to West Africa continue, while gasoline exports continue, the third week of July could see a noticeable change from what we’ve seen at the pumps so far in this sleepy summer.
Motorists take note: A drop in gasoline imports and strong exports to other countries could see refiners emerge the surprising winners for the summer of 2017