Low levels of fuel inventories in the United States have stoked supply jitters ahead of expectations for an above-average hurricane season, analysts said.
Gasoline and diesel stocks in the U.S. have both been trending at the lower end of their 5-year averages partly due to a string of refinery outages and unplanned maintenance in recent weeks.
Forecasters believe this year’s Atlantic hurricane season will produce more than 17 named storms, which could threaten a large portion of oil production in the U.S. and the bulk of the country’s refineries that are in areas prone to storms along the U.S. Gulf Coast.
U.S. distillate fuel oil stocks fell to their lowest last week since April 2005, latest data from the Energy Information Administration showed. Gasoline stocks fell by 2.4 million barrels in the week, compared with analysts’ expectations for a 527,000-barrel draw.
“A major disruption to Gulf Coast refining would quickly be felt in Eastern demand centers and could cause product prices there to spike as the region scrambles for additional imports to meet demand,” said Debnil Chowdhury, head of western hemisphere fuels and refining at S&P Global Commodity Insights.
Much of the East Coast refined products demand is met by inbound transfers from the Gulf Coast, Chowdhury added. Colonial Pipeline operates the main artery moving fuel from the U.S. Gulf Coast to the East Coast.
If a major hurricane were to hit the Gulf Coast this season, gasoline and diesel stockpiles could fall below their 5-year seasonal range, a new S&P Global Commodity analysis shows.
However, fuel demand, which generally declines when a storm disrupts transportation and economic activity, could limit refined products price volatility.
“If we have a strong hurricane season, and it’s supposed to be a big one this year, I think it negatively impacts prices and logistics,” said Joe DeLaura, senior energy strategist at Rabobank.
“Some refineries go out for a couple days or a week or so, but there’s a lot less product demand during that week too.”
Source: Reuters