I know that some of the teeming millions might not be all too familiar with some of the LA Hair Bands of my youth, but this one had its day on the charts.
I look back at the EIA stats and I feel like my day's coming and I might be able to open up for Poison at this rate. After extolling the virtues of being long gasoline in this market—boom. We not only see a 1.2M barrel draw yesterday, but we saw production top 10M b/d. That marks the third time we’ve topped that number so far this year. Anyone care to guess the last time we ran over 10M b/d this many times up until May? That’s right, the same number of times we’ve seen a friendly headline about Justin Bieber...never.
Oh sure, gasoline stocks at 240M barrels are a high for this time of the year, but it’s a whole different driving experience out there in America. We’re running around in more fuel efficient cars and trucks, but we’re running the highest YTD demand for gasoline (9.180M b/d). Take the last five weeks alone and we’re running a hot 9.5M b/d. Think about that kiddies; we’re just scratching the month of May and we’re already pushing over 9.6M b/d. Normally we see a good bump up in demand by June, higher in July and then we like to top out in August.
Last year we tapped demand on this week at 8.7M b/d and found our way to August and 9.7M b/d. Of course I’m just pulling weeks out so let’s look at a bigger picture. Over the past three years we’ve started the YTD at an average of 8.6M b/d (yikes!) and ran through demand from June through August at an average of 9.2M b/d. So in some of the worst times, we increased an average of 600K b/d. Holla.
I do hope you’re keeping up with me like the Kardashians, because I’m about to drop some Caitlyn on you. Going by a three year average, we’re expecting demand for gasoline to not only hit, but average 10.2M b/d. Booyakasha! Respect. Now let’s get back to those production numbers. Back in 2014 we managed to average gasoline production at 10M b/d from May through August. Since then and since demand has risen, we’ve only averaged 9.7M b/d. Even with feedstock dropping significantly and demand much higher, refiners aren’t stepping up.
As I mentioned yesterday, something has to get them going because America is going strong. It’s going to be a swift kick between the legs when we start to see gasoline prices rising and crude still struggling to get to $50. But let’s think about this in a different way—maybe refiners are already jammed up. Maybe they aren’t able to increase this gasoline production back up and above 10M b/d for that long anymore. Or maybe the demand for distillate (4wk avg 4.1M b/d) is pulling too much production to allow refiners to yield more gasoline.
No matter how this all shakes out, there’s a definite gasoline shortage shaping up and I was the one who told you this tsunami was coming. So school’s about to let out. April showers are bringing May flowers. Baseball is only 30 games in and the Cubs are the best team in baseball. We have a few weeks to go before we hit a proper summer and demand is waiting to see $3/gal gasoline.