Global gasoline exports have declined 24 per cent year-on-year as high diesel prices encourage refineries to priorities diesel production, tightening gasoline supplies across major markets, according to a Goldman Sachs report.
The report said diesel prices continue to trade close to record levels in the United States and Europe amid disruptions to crude supplies reaching refineries. The widening price gap between diesel and gasoline has prompted refiners to increase diesel output at the expense of gasoline.
The price difference between US diesel and gasoline has widened to more than USD 60 per barrel, compared with less than USD 3 per barrel a year ago, creating a strong incentive for refiners to maximise diesel production.
Consequently, diesel yields at US refineries exceeded seasonal norms by 0.6 percentage point between March and August. Gasoline yields, however, were 1.3 percentage points below seasonal norms during the period.
Goldman Sachs said the same trend was visible across the Organisation for Economic Co-operation and Development countries. OECD diesel refinery production remained nearly unchanged from a year earlier during the second quarter, while gasoline output declined by nearly 2 per cent.
“As a result, global gasoline exports are down 24 per cent year-on-year,” the report said, adding that the decline was sharper than the corresponding fall in diesel and crude oil exports.
The report said gasoline demand has remained more resilient than diesel demand despite elevated energy prices. Global diesel demand fell by an average of 4 per cent year-on-year during May-July, as high prices forced consumers and businesses to reduce consumption.
Gasoline consumption, however, has not witnessed a similar decline so far. Goldman Sachs said a sharper reduction in gasoline demand may require significantly higher prices if geopolitical conflicts continue to restrict refinery output and gasoline inventories keep falling.
Inventories are also showing increasing tightness. Both diesel and gasoline commercial stocks across OECD economies remain near the bottom of their seasonal ranges. However, gasoline inventories have declined more sharply relative to seasonal levels this year.
US diesel stocks have increased against the usual seasonal trend over the past three weeks, helping narrow the gap with normal inventory levels, the report said.
Gasoline markets are also facing pressure from lower naphtha availability. Naphtha is used as a component and feedstock in gasoline blending. Global naphtha exports have declined by an average of 30 per cent year-on-year over the past five months, increasing blending costs and adding to the pressure on gasoline supplies.
Goldman Sachs said prolonged disruptions arising from the Middle East and Russia-Ukraine conflicts, or further damage to energy infrastructure, could intensify the tightening in global gasoline markets.
