By Laura Sanicola
(Reuters) – U.S. gasoline prices rose earlier this month but are falling again after outages at West Coast refineries eased and seasonal demand fell.
Prices fell after a week-long rally after the Organization of the Petroleum Exporting Countries and its allies announced plans to cut OPEC+’s 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 US strategic oil reserves by the end of December. Biden’s Democrats hope the move will help the party maintain a narrow majority in both houses of Congress in November’s midterm elections.
Not all prices are falling. US diesel prices have risen in the last two weeks due to high global demand, low inventory levels and low production in Europe due to refinery strikes in France.
WHERE ARE FUEL PRICES NOW?
The national average is at $3.85 a gallon, 18 cents higher than the mid-September low of $3.67 a gallon, but lower than the highs hit 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 United States uses about 9 million barrels of gasoline per day and about 3 million barrels of diesel, according to federal data.
US oil refiners are scrambling to replenish low inventories even as cold weather hits, which typically corresponds with a drop in fuel demand. The four-week moving average of gasoline demand is 2.4% lower than last year, while refinery utilization is 5% higher.
US gasoline prices surged earlier this year, peaking in June, following Western sanctions on Russian energy products and lower global refinery capacity after pandemic-related shutdowns. .
WHAT AFFECTS THE PRICES?
Last month, US gasoline prices rose in large part due to outages at regional refineries on the West Coast and Midwest. In California, costs have risen more than $1 a gallon in the last month, while in Texas, prices are still lower than a month ago.
Refinery maintenance often occurs in the fall when demand drops after the summer driving season. This fall, however, some refineries had to shut down units without notice due to infrastructure problems.
Three refineries in Washington state and California had planned maintenance, while another had an unplanned outage in September, according to Refinitiv data and refining sources. In the Midwest, BP-Cenovus’ Toledo refinery is still out of commission after a fatal explosion shut down the plant late last month.
In October, several French refineries closed as workers went on strike to combat rising costs of living, causing global distillate inventories to drop and US distillate exports to rise.
US oil refineries were using 89.5% of capacity as of last week, still seasonally high. Overall US refining capacity has been in decline since the coronavirus pandemic crushed demand in early 2020.
Gasoline produced to meet California environmental standards has fallen nearly $2 a gallon in wholesale markets in Los Angeles and San Francisco in the past month due to increased supply, traders said.
WHAT OTHER FACTORS AFFECT FUEL PRICES?
Tight refining supply has kept the gap between wholesale gasoline futures and retail prices wide, currently around $1.25 a gallon, well above the 88-cent average over the past five years.
U.S. retail gasoline demand was sluggish over the summer but has improved in the past month, according to federal data. That has kept inventories at bay, with US gasoline stocks near an eight-year low. Additional refining shocks could squeeze more of that inventory, driving up prices.
(Reporting by Laura Sanicola and Stephanie Kelly; Editing by David Gaffen and David Gregorio)