NEW YORK U.S. gasoline margins fell by more than 11 percent early on Friday, hitting one-year lows as record inventories and signs of weakening demand dampen expectations and upend trade flows.
The sharp drop in gasoline margins came as government data showed U.S. gasoline inventories reached record highs amid weakening demand at the pump. Trading houses such as Noble and Mercuria have meanwhile booked cargoes for a highly unusual route away from the gasoline-hungry U.S. East Coast to West Africa.
The U.S. gasoline crack spread <RBc1-CLc1 >, a key indicator of refining margins, fell 11.2 percent to a one-year low of $9.50 cents a gallon in early trading on the New York Mercantile Exchange.
U.S. gasoline demand growth will be lackluster this year largely because the United States reached full employment last year, Harry Tchilinguirian, BNP Paribas' global head of commodity markets strategy, told the Reuters Global Oil Forum on Friday.
"Given that we see U.S. refiners still producing at record levels this summer, and that the demand backdrop is lackluster in terms of growth, we would stay away from buying summer gasoline cracks," he said.
Gasoline stocks rose by 2.8 million barrels last week, pushing inventories of the fuel to a fresh record 259 million barrels, according to the latest data from the U.S. Energy Information Administration. U.S. East Coast gasoline inventories have been at record high levels for weeks.
Inventories of gasoline have surged 10 percent since the end of 2016, EIA data showed.
Overall demand for gasoline in the last four weeks was down 5.3 percent year-on-year at 8.43 million barrels per day (bpd).
The United States consumed more than 9 million bpd of gasoline in 2016, making up nearly 10 percent of global oil demand. The U.S. East Coast accounts for over a third of the national consumption.
(Reporting by Jarrett Renshaw; Editing by Paul Simao and Meredith Mazzilli)