US gasoline margins slump on lackluster summer demand

U.S. gas futures dropped about 3% on Tuesday, reducing their premium over crude to its lowest since November 2023. This was after government data revealed a weaker average demand for gasoline on a 4-week basis.

Why it Matters

The U.S. is the largest consumer of gasoline in the entire world. Demand for motor fuel is usually highest between April and September, which is considered summer driving season.

Refiners may be forced to reduce production by processing less oil if margins are lower on motor fuels. This would put pressure on oil demand and, if fuel consumption suddenly increases, the lack of supply could lead to a spike in price at the pump.

Joe DeLaura, a Rabobank analyst, said: "We are zigzagging between good numbers and bad prints on demand." The weak margins will likely lead to a longer than usual refinery maintenance period, which begins in mid-September.

By the Numbers

The last drop in gasoline futures was 2.8%, to $2.19 a gallon. The crack spread is the premium they pay over West Texas Intermediate crude futures. The price of oil has fallen to $13.32 per barrel, the lowest since November 7, 2023.

According to the U.S. Energy Information Administration, the average gasoline demand for the four weeks ended on Aug. 16 was 9.11 million bbls/day compared to 9.18 million bbls/day the previous week. (Reporting and editing by Matthew Lewis in New York)

(source: Reuters)