Growing gasoline production and rising inventories are beginning to erode global refinery gasoline margins, according to the U.S. Energy Information Administration.
The agency said on Thursday that the reformulated blendstock for oxygenate blending (RBOB)-Brent crack spread declined 18 cents per gallon year-over-year to 37 cents per gallon in June, slightly below the five-year average.
Gasoline crack spreads have also been declining outside of the United States.
In the European gasoline market, the Northwest Europe gasoline-Brent spot crack spread averaged 26 cents/gal in June, the lowest June spread since 2014.
The Singapore gasoline-Dubai/Oman spot crack spread averaged 22 cents/gal in June, the lowest June spread since 2012, the EIA said.
Those spread declines came despite rising gasoline consumption United States, China, and India.
“Growth in gasoline supply has exceeded the increase in gasoline consumption since last summer,” the EIA said.
Refineries in the United States, Europe and Asia all increased gasoline production levels compared to distillate production when crack spreads were high in 2015 and early 2016.
That increase led to high gasoline inventory levels across the globe that have consistently held above five-year averages, the agency said.
In the United States, the six-month moving average gasoline-to-distillate production ratio in April was at its highest level since 2011.
Data seen by the EIA showed that the aggregate, six-month average gasoline-to-distillate production ratio for 14 European countries increased by almost 6 percent since June 2015 after holding steady from the beginning of 2013 through the middle of 2015.
In Asia, the aggregate, six-month average gasoline-to-distillate production ratio of China, Japan, and South Korea reached the highest level ever recorded by the Joint Organizations Data Initiative in April.
The gasoline production growth in Asia is primarily being driven by the Chinese refining sector.
U.S. gasoline inventories in PADD 1, the location of the New York Harbor trading hub, stood at 14.3 million barrels above the five-year average as of July 22.
In the Northwest Europe trading hub, gasoline inventories were 4.6 million barrels higher than the five-year average as of July 21.
That level marked “the largest difference in at least two years,” the EIA said.
At the Singapore trading hub, light distillate inventories, including gasoline, were at 2.8 million barrels above the five-year average as of July 20.
The EIA is currently projecting that the U.S. gasoline-to-distillate production ratio will remain “elevated” through the summer.
The agency said the elevated production ratio could keep inventory levels high and “put further downward pressure on domestic gasoline crack spreads” for the next few months.