Key Takeaways:
A massive drawdown in US gasoline inventories sent a bullish jolt through energy markets, suggesting robust consumer demand even as oil prices remain elevated amid the ongoing conflict in Iran. West Texas Intermediate crude futures climbed more than 1.5 percent to trade above $96 a barrel after the American Petroleum Institute reported gasoline stockpiles plunged by 8.472 million barrels last week.
"This is a stunningly large draw in gasoline that catches the market off guard," said Tom Kloza, a veteran analyst, in a note to clients. "It points to demand holding up far better than anyone expected, which is a very bullish signal in a market already starved for supply."
The API data showed a broad tightening of US petroleum supplies. Crude oil inventories fell by 1.793 million barrels, a smaller draw than the previous week's 4.47 million barrel decline but still a firm signal of tightening fundamentals. Distillate stocks, which include diesel and heating oil, also dropped by a significant 2.602 million barrels.
The unexpected strength in fuel consumption adds another layer of upward pressure on a global oil market already reeling from the war in Iran. With an estimated 9 to 14 million barrels per day of supply disrupted by the conflict, according to barrel counters, the global surplus has evaporated, leaving markets vulnerable to further price spikes. The US Energy Information Administration will release its official weekly inventory data on Wednesday, which will be closely watched for confirmation of the API's bullish figures.
The large inventory draw comes as the US Northeast, a region heavily dependent on European gasoline imports, is seeing those shipments slow to a record low. The Colonial Pipeline, a critical artery for fuel from the Gulf Coast, is running at full capacity and cannot provide additional supplies. This dynamic has led to the unusual situation of diesel cargoes being exported from New Jersey to Europe, a reversal of the typical flow that could further compromise supplies in the Middle Atlantic states.
Refiners like Phillips 66 and PBF Energy are seeing spectacular profit margins for diesel and jet fuel, while retail gasoline margins are being squeezed. The average gross margin for New Jersey retailers was just 11 cents per gallon recently, a quarter of the average over the last five years, putting many on the brink of losing money on every gallon of regular gasoline sold.
This article is for informational purposes only and does not constitute investment advice.
