Oil refiners are making less money selling their gasoline as demand during the peak summer driving season has fallen short of their expectations. This softness in gasoline markets has upended years of record profits on selling transportation fuels.
In the U.S., the world’s largest gasoline market, refiners ramped up sharply, expecting demand that never materialized. U.S. gasoline demand was 9 million barrels per day (bpd) in the first week of June, 1.7% below last year and seasonally the lowest since 2021, according to government data.
The weakness in the gasoline market has already led to run cuts in Asia, and refiners elsewhere are also likely to pull back in the weeks ahead. This could reduce global demand for crude oil.
BMI, a unit of Fitch Solutions, warned that the retreat from elevated margins could pose a risk to refiners’ continued maximum output strategy to reap record profits.
Brent oil prices are down about 9% from a mid-April peak to around $83 a barrel, mostly due to concerns that the OPEC+ producer group will add supply to the market. The producer group has also warned that a slow start to the summer driving season and low margins are weighing on sentiment.
Even with crude prices slipping, Asian refiners’ profit on making gasoline from a barrel of Brent halved in the last week of May to about $4 per barrel. A glut of fuel supplies prompted the fall in refining margins, according to Wood Mackenzie analyst Priti Mehta.
Overall refining margins fell under $2 a barrel in Singapore in May, compared with an average of $5 a year ago. European gasoline refining margins fell to $10.80 a barrel on June 13, the lowest since January 25. The U.S. gasoline crack spread, the difference between gasoline futures and the cost of WTI crude oil, was under $22.50 a barrel for the first time since February.