Summary
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- AAA data showed average US gasoline prices rose 6 cents this week to $3.88 a gallon Friday
- Refinery outages in Russia and the United States are squeezing fuel supplies
- EIA data showed US petroleum products exports hit a weekly record 8.7 million bpd
(Reuters) – U.S. drivers have seen gasoline prices climb again after weeks of steady declines, as renewed fighting between the U.S. and Iran lifted crude oil prices to their biggest weekly rise in eight weeks.
Disruptions in the global refining system and robust U.S. fuel exports further tightened supplies, and average pump prices rose 6 cents this week to $3.88 a gallon on Friday, AAA data showed. It was the biggest weekly increase since mid-May.
Renewed fighting between the U.S. and Iran over the Strait of Hormuz sent energy prices back up sharply this week. With the U.S. summer driving season in full swing, stubbornly high gasoline prices have emerged as a political flashpoint for President Donald Trump, whose Republican Party is campaigning to hold thin majorities in the U.S. Congress in November midterm elections.
Trump recently accused oil companies of price gouging.
“Gasoline prices have rallied alongside the massive move higher in crude oil after several tankers in the Strait of Hormuz were attacked,” Alex Hodes, director of energy market strategy at brokerage StoneX, said.
Global oil futures benchmark Brent was on track for a weekly gain of roughly 5.5% after attacks on several tankers transiting the Strait of Hormuz. This was followed by tit-for-tat strikes between the U.S. and Iran and Washington’s decision to revoke a general license permitting the sale of Iranian oil.
Oil flows through the Strait of Hormuz remain well below pre-conflict levels, stoking fears that even minor disruptions could ripple through global fuel markets. The key waterway carried about 20% of daily global oil and gas supplies before the start of the war on February 28.
Trump has pressed gasoline retailers to cut prices more aggressively. The administration has urged the U.S. Justice Department to investigate possible gasoline price gouging and recently introduced a new price-cutting initiative offering discounted gasoline at some locations in Pennsylvania and New Jersey.
TIGHTENING SUPPLY
Crude supply concerns are only part of the story, Hodes added, pointing to unplanned refinery outages in both Russia and the U.S. that have squeezed fuel supplies.
Russia’s refining sector has been disrupted as repeated attacks reduced fuel production and worsened shortages. Moscow has curbed diesel exports and boosted gasoline imports, tightening global fuel supplies and lifting prices.
Russian output of gasoline, diesel, jet fuel and fuel oil has been decimated with many months of downtime ahead, said Tom Kloza, chief energy adviser at Gulf Oil.
In the U.S., refinery outages have further strained supplies, including disruptions at Marathon Petroleum’s 146,000-barrel-per-day refinery in Detroit, Michigan, and Delta’s 190,000-barrel-per-day refinery in Trainer, Pennsylvania.
U.S. gasoline inventories fell by 1.9 million barrels last week to 212.1 million barrels, the Energy Information Administration said on Wednesday, leaving stockpiles nearly 10 million barrels below the five-year average.
Gasoline stocks are running below seasonal norms across all U.S. regions, but the shortfall is especially pronounced on the Gulf Coast, said Denton Cinquegrana, chief oil analyst at Dow Jones Energy.
Inventories in the U.S. Gulf Coast, which produces the vast majority of the nation’s supply of refined products, fell to 76.4 million barrels last week, below the five-year average of 82.3 million barrels.
Moreover, the loss of Middle Eastern and Russian barrels from the global market has allowed refiners in the U.S. to reap stronger margins as the swing suppliers of fuel.
U.S. petroleum products exports hit a weekly record of 8.7 million bpd in the week to July 3, EIA data showed.
“The U.S. Gulf of Mexico may see consistent gasoline exports of 1-million b/d and there are bets among Houston traders as to whether 2-million b/d will be achieved for distillate departures,” Kloza wrote to clients on Thursday.
The U.S. summer driving season from June through early September typically boosts gasoline consumption, while production of more expensive summer-blend fuel raises refining costs, boosting pump prices.
“It seems prices will mostly drift up and down here in the short-term,” Cinquegrana said.
Reporting by Nicole Jao in New York; Additional reporting by Shariq Khan; Editing Liz Hampton and David Gregorio
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