Largest East Coast Pipeline Reveals Demand For Gasoline Is Crashing
There’s a reason this week’s EIA survey showing gasoline and oil supplies declining has failed to stop RBOB prices from collapsing to 7-month lows: The start of the summer has done nothing to revive sluggish demand. That’s because despite what the EIA survey said, little has been done to reduce record fuel inventories.
The squeeze has gotten so bad, Northeast Colonial Pipeline Co., the operator of the biggest US fuel pipeline system, said that demand to transport gasoline to the country’s populous northeast is the weakest in six years, the latest symptom of a global oil market grappling with oversupply. It’s notable that this peak has arrived despite the advent of the summer driving season, which has seen gasoline demand pull back from last year’s record highs, according to Reuters.
Because of the oversupply in the northeast, “line space”… the cost of renting “space” on the pipeline to assure one’s ability to get supplies of gasoline when necessary… has gone negative, according to Reuters. What can be more exemplary of excess inventories and of reduced demand for gasoline than this?
Refiners are in part to blame for the problem – they have continued to pump motor fuel at record levels for the second year in a row, worsening the oversupply problem, for fear of losing access to pipeline capacity.
More broadly, attempts by large producers to reduce global supplies have failed to meaningfully raise the price of oil. And with good reason: Traders have been skeptical of an agreement between OPEC and non-OPEC producers, including Russia, to extend last year’s supply cut, and already they’re concerns are being validated: Iraq has said it plans to increase production later this year despite the agreement.
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