By Laura Sanicola
(Reuters) – U.S. gasoline prices rose earlier this month but fell again after West Coast refinery outages eased and seasonal demand eased.
Prices fell after a week of recovery after the Organization of the Petroleum Exporting Countries and its allies announced plans to cut the OPEC+ production target by 2 million barrels a day.
President Joe Biden plans to sell the last part of a release of 180 million barrels of crude oil from the US Strategic Petroleum Reserve in late December. Biden’s Democrats hope the move will help the party maintain slim majorities in both houses of Congress in November’s midterm elections.
Not all prices fall. US diesel prices have risen over the past two weeks due to high global demand, low inventory levels and low output in Europe due to refinery strikes in France.
WHERE ARE FUEL PRICES NOW?
The national average is $3.85 a gallon, up 18 cents from its mid-September low of $3.67 a gallon, but down from peaks reached two weeks ago.
The price of diesel has risen 33 cents in the past month, according to data from the US Energy Information Administration, now at $5.32 a gallon.
The U.S. uses about 9 million barrels of gasoline per day and about 3 million barrels of diesel, according to federal data.
US oil refineries are scrambling to replenish low inventories even as cold weather sets in, which usually equates to reduced demand for fuel. The four-week moving average of gasoline demand is 2.4% lower than this time last year, while refinery utilization is 5% higher.
U.S. gasoline prices rose earlier this year, peaking in June, following Western sanctions on Russian energy products and lower global refinery capacity following pandemic-related shutdowns.
WHAT AFFECTS PRICES?
Last month, US gasoline prices rose largely due to regional refinery outages on the West Coast and Midwest. In California, costs have increased by more than $1 per gallon in the past month, while prices in Texas are still lower than a month ago.
Refinery maintenance often takes place in the fall when demand drops after the summer driving season. Last fall, however, some refineries had to shut down units without warning due to infrastructure problems.
Three refineries in Washington state and California had scheduled maintenance while another had an unplanned outage in September, according to Refinitiv data and refining sources. In the Midwest, BP-Cenovu’s Toledo refinery remains offline after a deadly explosion shut down the plant late last month.
In October, several French refineries closed as workers went on strike to fight the higher cost of living, reducing global distillate inventories and increasing US distillate exports.
US oil refineries were using 89.5% of capacity as of last week, still a seasonal high. Total U.S. refining capacity has declined since the coronavirus pandemic crushed demand in early 2020.
Gasoline produced to meet California’s environmental regulations has dropped nearly 2 gallons in the Los Angeles and San Francisco wholesale markets over the past month due to increased supply, traders said.
WHAT OTHER FACTORS AFFECT FUEL PRICES?
A tight refining supply has kept the gap wide between wholesale gasoline futures and retail prices, currently at about $1.25 a gallon, well above the average of 88 cents over the past five years.
U.S. gasoline demand was sluggish over the summer, but has improved over the past month, according to federal data. That has kept a lid on inventories, with U.S. gasoline inventories near an eight-year low. Further refining disruptions could put more pressure on inventories and raise prices.
(Reporting by Laura Sanicola and Stephanie Kelly; Editing by David Gaffen and David Gregorio)
