High gasoline inventories in the U.S. have pushed refining margins in the country to their lowest level in five years, the Energy Information Administration (EIA) said on Tuesday.
Gasoline refining margins are the difference between the spot price of gasoline and the spot price of international benchmark Brent crude, according to the EIA.
The administration said in a statement that these margins have been on a downward trend since August, and levels hit this October and November to their lowest for these two months in the past five years.
"Flattening year-over-year growth in gasoline demand in the U.S., combined with high levels of refinery output, have contributed to low or negative motor gasoline refining margins for refiners along the East and Gulf Coasts," the statement said.
Higher gasoline prices in the U.S. this year have caused gasoline demand growth to flatten, the EIA said, adding refinery output has also increased due to strong demand for diesel fuel in the country.
As gasoline production outpaced demand and gasoline inventories increased beyond their normal seasonal levels, these first lowered gasoline prices and subsequently gasoline margins as a result, according to the EIA.
"Motor gasoline margins based on wholesale gasoline prices at New York Harbor averaged $0.26 per gallon (3.78 liters) in the first half of 2018, but these margins fell to an average of $0.04 cents per gallon in October 2018 and have been negative so far in November," the statement said.
"Changes in margins in the Gulf Coast were similar, falling from $0.27 per gallon in the first half of the year to $0.01 cent per gallon in October and falling further to negative values during November," it added.
The EIA said high levels of U.S. gasoline production in 2018 have outpaced gasoline consumption growth in 2017. This paved the way for average gasoline inventories to be 14.8 million barrels higher n November compared to the same period in 2017.
On the demand side, estimated monthly gasoline consumption through the first three weeks of November averaged 9.2 million barrels per day (bpd), which is a decrease of 262,000 bpd from November 2017, according to the EIA.
By Ovunc Kutlu