US gasoline demand increased by around 370 tb/d from the previous month to stand at around 9.1 mb/d in August. This level represented a rise of 240 tb/d from the same month a year earlier. US gasoline demand picked up in August, with the summer driving season recovering to over 9 mb/d; however, domestic demand on a y-o-y basis remained down by more than 2%. Higher domestic demand along with tight product supply generated by the earlier closure of some East Coast refineries amid falling inventories and stronger export opportunities allowed gasoline cracks to show a sharp increase during the month.
Solid demand from Latin America kept sentiment firm, with Mexico leading motor fuel requirement due to a shutdown after a fire in the Madero refinery at mid-August, while Venezuelan and Brazilian demand was offering further support. The supply side was also lending support, as the refineries shifted to winter grade specifications and the tight situation was boosted by the required shutdown of some refineries in Louisiana due to Hurricane Isaac and the disruption of Venezuela’s refinery located in Amuay bay. The gasoline crack averaged $49/b in August, a sharp gain of $4 from the previous month’s average.
Middle distillate demand stood at around 3.5 mb/d in August, similar from the previous month, but decreasing by 400 tb/d from the same month a year ago.
Middle distillates posted an improvement from the month before, mostly due to favourable arbitrage opportunities to Europe and Latin America and the tight environment after the shutdown of some refineries in the region. This supply-side support, as well as falling inventories could offset the weak domestic demand, and along with the higher requirements from South America, specifically Chile and Ecuador, could allow the gasoil cracks to keep rising. The gasoil crack on the US Gulf Coast gained almost $4 to stand at around $33/b in August. At the bottom of the barrel, fuel oil cracks showed a slight improvement, on the back of buying interest on 1% sulphur volumes. Moreover, the market was quiet until the end of the month when expectations of additional US volumes heading to Singapore in the coming period to make up for potential shortfalls from South America revived the market. The fuel oil crack averaged $11/b in August, a gain of $1 from the previous month.