Despite lower demand, high refinery utilization rates on the East Coast and strong imports from the Gulf Coast and Europe have helped raise inventories. Trade press reports indicate that Gulf Coast deliveries to PADD 1 are at maximum levels. Additionally, increasing refiner crack spreads for distillate in Europe have helped drive up utilization rates both there and in PADD 1 for exports to Europe. This has led to corresponding strong levels of gasoline production in the region and gasoline imports into PADD 1 despite the closure of the trans-Atlantic arbitrage window. The need for European refiners to continue to produce distillates – and as a result, surplus gasoline – to meet European domestic demand, combined with limited markets for their surplus gasoline, has helped keep gasoline imports from Europe flowing into PADD 1.
The combination of relatively high supply and low demand has pushed PADD 1 inventory levels up 10 million barrels (18 percent) compared to June 2012 – well above the top of the five-year range – putting downward pressure on prices. New York Harbor conventional gasoline spot prices in the first half of 2013 averaged 13 cents (4 percent) lower than the same period in 2012.
MIDWEST AND ROCKIES (PADDs 2 and 4)
Planned and unplanned refinery maintenance as well as longer-term refinery upgrading projects over the past few months reduced gasoline production in the Midwest, pushing gasoline inventories lower and gasoline prices higher.
Chicago conventional spot prices increased $0.36 over four days in mid-April and continued upward before spiking another $0.57 between May 29 and June 3, sending regional retail prices to recent or all-time highs. Conventional gasoline spot price differentials between Chicago and New York Harbor approached $1 per gallon at their peak on June 3. The Chicago spot price has since come down, falling $1.10 during the rest of June as refineries returned to full production, with declines in retail prices following.
Beginning in mid-April, refinery maintenance caused gasoline inventories in PADD 2 to fall sharply – by more than 6 million barrels, moving stocks from the top to the bottom of the five-year range – before recovering in May and June as major refineries restarted from maintenance, long-term upgrades were completed, and product from PADD 3 entered the market. With production returning to normal levels, prices in the Midwest have come down significantly, with PADD 2 retail prices dipping below the national average on June 24 for the first time in more than two months.