Gasoline Demand Recovering, Diesel Still Dismal

Wednesday’s EIA report helped break the market outside of its 5-cent range within which it has closed this week, but only just barely. Despite a headline build in crude inventories, the market ended the day roughly 30 cents higher – not even 1% up. After months of 5-10% daily swings, it’s remarkable how calm markets have become.

Yesterday’s EIA report was full of surprises, with crude inventories building far more than even the API projected, diesel stocks showing a surprise build, and gasoline drawing down by 4x the expected amount. Crude’s hefty build was concentrated in the Gulf Coast, where imports exploded week-over-week to a two-year high.  While crude prices bucked expectations and moved higher, both gasoline and diesel reacted more predictably. Gasoline picked up 1.5 cents, while diesel fell by almost a penny.

Markets were particularly glad to see gasoline inventories dropping for the week ending July 3 (note – right before the holiday). Gasoline demand rose by roughly 200 kbpd compared to the week prior, sustaining gains since spring’s collapse. Still, demand was just 8.8 MMbpd, roughly a million barrels per day off from summer 2019. But with refiners running at only 77.5% capacity, it seems markets have found a reasonable balance. Diesel demand, on the other hand, signaled a more bearish outlook; demand fell back by 750 kbpd versus last week to just 3 MMbpd.

This morning the market is turning lower as markets continue digesting yesterday’s report. Crude oil is trading at $40.54, down 36 cents from Wednesday’s closing price.

Fuel prices are also moving lower, pulled down by sinking crude prices. Gasoline is trading at $1.2809, down a penny from yesterday but now holding a commanding premium above diesel. Diesel is trading at just $1.2320, down 0.2 cents.