Oil falls on growing concerns of gasoline glut despite strong summertime driving demand

08-Jul-16

U.S. oil for August delivery dipped by over 2 dollars (4.8%) to US$45.1 a barrel on the Nymex, while Brent plunged in the similar range to US$46.4 a barrel on ICE Futures Europe. Both benchmarks fell to the lowest level since May 10 on growing concerns that a glut of gasoline is due to persist despite strong summertime driving demand.

Demand for gasoline usually peaks in the summer as driving increases during vacation season, prompting refineries to buy more crude oil to turn into gasoline. But this year, refineries have already been running hard for months churning out gasoline, so the market is amply supplied. Robust gasoline supplies are making it less profitable for refiners to produce more gasoline, and refinery utilization unexpectedly fell last week. If refiners continue to run at lower rates and buy less crude oil, that could worsen the oversupply of crude, analysts say. Crude inventories fell by 2.2 mln barrels in the week, the EIA said, less than analysts surveyed by The Wall Street Journal had expected. The data came out one day later than usual due to the Independence Day holiday.