Gasoline Stocks Reach Seasonal Peak

Refined product futures are seeing a wave of selling for a 2nd straight day following multiple reports of potential progress towards a cease fire plan in Ukraine. Diesel futures are leading the slide lower, down around 4 cents on the day and 10 cents since Tuesday, while gasoline futures are down around 2 cents today and 8 cents since the reports began.

Yesterday’s DOE report suggested that gasoline stocks in the U.S. may have reached their seasonal peak after rising every week for the past 3 months. The beginning of the seasonal RVP transition and several refinery upsets, not to mention uncertainty over the looming RVP waiver in the Midwest, should all contribute to the steady reduction of inventories over the next 2 months.

Diesel demand came crashing back down to reality with the DOE’s estimate showing a 20% decline last week as the 2 week spike in heating and electricity demand needs came to an end.

Refinery runs continue to hold near their 5 year average for the 4th straight week with above-normal output in PADDs 1 and 2 offsetting another drop in PADD 5 last week. Note the already low gasoline inventories in PADD 5 and you can see why prices spiked to dramatically the past 2 weeks following the fire that has taken PBF’s Martinez out of service.

Speaking of which, prices finally pulled back in both the SF and LA spot markets for the first time since the fire broke out February 1. While the refinery remains offline indefinitely, it seems that importers will be taking advantage of the premiums that were approaching $1/gallon, which seems to be easing concerns of a severe shortage for now.

We’re in the mid-month data deluge with the EIA, OPEC and IEA all releasing their monthly market outlooks on top of the weekly reports from the API and DOE.

OPEC held its outlook for global demand stable for 2025 at 1.4 Million barrels per day, while its supply growth estimate is just 1 million barrels/day for the year, which would allow the cartel to continue its plans to start unwinding voluntary production cuts if it holds true. OPEC’s output declined by 121mb/day in January with small declines from numerous countries including Saudi Arabia, UAE, Venezuela, Nigeria and Kuwait. OPEC’s report also cited the strong recovery in Gulf Coast refining margins in January thanks to cold weather and a robust export market, while margins in Europe and Asia remain under pressure.

The IEA continues to publish reports contrary to OPEC’s bullish stance, predicting that oil supply growth will outpace demand by ½ million barrels/day in 2025 with non-OPEC production continuing to grow, and keep pressure on the cartel to continue its voluntary production cut targets.

The IEA’s report also noted how refinery margins in Asia collapsed in January, after new U.S. sanctions on Russian oil removed some of the big discounts that had propped up refiners in the region for the past few years.

That sure doesn’t sound like Drill Baby Drill. Chevron announced new plans to cut up to 20% of its global workforce over the next 2 years with challenging conditions in its upstream, refining and renewables business units all contributing to the harsh cost cutting plans.