The Smaller-Than-Expected Drop In Gasoline Inventories

The energy complex opened mixed this morning with prompt month gasoline futures sinking ~.0150 while diesel trades on the green side of flat. The American crude oil benchmark, West Texas Intermediate futures, are changing hands 70 cents over yesterday’s settlement.

The smaller-than-expected drop in gasoline inventories, as reported by the Department of Energy yesterday, kept a leash on RBOB futures in Wednesday’s trading. While stockpiles are still at seasonal lows as we head into the busiest travel time of the year, the June RBOB contract pulled back from +7 cent gains yesterday to end the formal trading session only 2 cents higher.

Back to reality? Diesel premiums in the New York market dropped below 2 cents yesterday, leading some to believe the trip that took us as high as $1.20 over futures, just 13 days ago(!), to be done. ULSD inventory levels in PADD 1 remain at seasonal lows but the collapse of the prompt-second NYMEX HO futures spread seems to be the main driver for the drop in basis differentials in the region.

Nationwide refinery run rates continued their trek higher last week, reaching over 93% utilization for the first time since 2019. The drop in production levels on the West Coast and the scarcely populated PADD 4 were drastically outpaced by the increase in throughput at plants east of the Rockies.

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