In contrast, the combination of flat refinery inputs and a steep year-on-year decline in gasoline imports led to a sharp draw in gasoline inventories. From a surplus of 7.4 million barrels (3.4 percent) compared to their five-year average on January 13, gasoline stocks swung to a deficit of 7.6 million (3.7 percent) by May 25. Especially-steep drops on the West Coast led the decline. Distillate inventories, which had closely tracked their five-year average through the first quarter, also began to drift lower in April as refinery inputs languished. Distillate inventories fell 18.1 million barrels from the end of the first quarter to May 25, failing to commence their typical gradual seasonal build.
A late-spring uptick in refinery inputs had been slow, until last week, to stem the persistent inventory trends. With the exception of the West Coast, prices did not respond strongly to persistent product inventory draws, owing to the general weakness in U.S. petroleum demand and renewed concerns regarding global economic growth. Based on monthly data, total U.S. consumption of petroleum products was down 3.9 percent (750,000 barrels per day [bbl/d]) year-over-year in the first quarter. While weekly data show some signs of firming U.S. demand, crack spreads on the Gulf Coast and trans-Atlantic product price differentials have not strengthened to the degree one might expect, especially given the persistent inventory draws.
The tepid flow of product imports into the U.S. market further compounded product draws. Often when domestic refinery inputs slump and inventories draw, wholesale gasoline prices in the United States rise compared to those in Europe, sending a market signal to ship gasoline across the Atlantic. But these price differentials have not materialized in the current market cycle. In April and May, wholesale gasoline in New York Harbor prices averaged a one cent discount to the Amsterdam-Rotterdam-Antwerp product hub, providing no incentive to move significant volumes of European products to the United States. In the four weeks leading up to June 1, the United States imported 721,000 bbl/d of gasoline, 39 percent less than the almost 1.2 million bbl/d imported over the same period a year earlier.
In May, typically the month with the highest crack spreads in the eastern half of the country, Gulf Coast 3-2-1 crack spreads fell one cent per gallon below their five-year average level for the month, and in New York Harbor that crack spread moved to seven cents per gallon below its typical 34 cents per gallon. The one exception was the West Coast, where crack spreads increased from April to May (the West Coast usually sees an April peak), as resolution to the outages in the regions was slow to develop.