gasoline demand in the US starts to slide

A 357,000-barrel decline in US gasoline inventories to 216.679 million barrels for the week ended April 1 fell short of analyst expectations, an analysis of the oil data released Wednesday by the US Energy Information Administration (EIA) showed. Analysts polled by Platts had projected a drop of 2.1 million barrels.

This analysis and commentary is provided by Linda Rafield, Platts senior oil analyst and editor of the weekly Futures and Derivatives Review, a supplement to Oilgram Price Report.

The rate of decline slowed from the seven-week average of 2.34 million barrels and was tempered by sluggish demand. Also, gasoline inventories, at 216.679 million barrels, were 2.936 million barrels greater than the five-year average, but 5.695 million barrels below year-ago levels.

Implied demand* for gasoline on a reporting-week versus reporting-week basis dipped a slight 13,000 barrels per day (b/d) to 8.853 million. But on a four-week moving average basis, gasoline demand was 8.906 million b/d, or 112,000 b/d below year-ago levels. The slowing of demand could possibly reflect the following: 1) that the movement of summer grade gasoline out of primary storage and into the hands of distributors has largely already taken place; 2) that high prices are starting to thwart consumer demand at the pump; and/or 3) that unemployment is still high enough to deter an increase in discretionary spending.

Total U.S. oil demand on a four-week moving average was 19.052 million b/d, up 28,000 b/d from a year ago and slower than the early 2011 pace.

US product inventories declined 1.71 million barrels to 684.697 million barrels, leaving stocks 15.741 million barrels greater than the five-year average, but 8.692 million barrels less than year-ago levels.

Meanwhile, inventories of middle distillates edged up a lower-than-expected 195,000 barrels to 153.520 million barrels. Analysts polled by Platts had expected a build of about 600,000 barrels in middle distillates.

Inventory changes in products were fairly modest in this week’s EIA report, as demand for winter fuel began to taper off ahead of the yet-to-begin summer driving season.

The build in crude oil inventories continued, with stocks climbing 1.952 million barrels to 357.664 million barrels. US crude stocks have cumulatively increased 22.39 million barrels since the week ended January 7, which is in line with seasonal tendencies.

Crude stocks on the West Coast rose 1.294 million barrels to 51.153 million barrels. But given that this region is largely disconnected from the rest of the U.S. oil distribution system the bearish reaction to the headline increase was tempered.

Inventories at Cushing, Oklahoma, delivery point for New York Mercantile Exchange (NYMEX) oil futures contracts, dipped 16,000 barrels, down from the all-time high of 41.886 million barrels posted the week ending March 25.

Platts