IEA sees US gasoline markets to be tight again this summer

Crude oil inventories are so low that major importing countries could face tight gasoline supplies and volatile prices at the pump during the peak summer driving season, a respected study said. This month's cuts in production by OPEC are likely to exacerbate the problem, causing uncertainty for refiners who must buy crude to process gasoline and other refined products, the International Energy Agency said in its monthly energy report.
"It is widely expected that the US gasoline markets will be tight again this summer.... Consequently, price spikes through the peak demand season are a possibility to contend with," the IEA said. The Paris-based IEA is an agency of the Organization for Economic Cooperation and Development, a club of the world's wealthiest nations.

Its forecast comes as sombre news for North American motorists, who endured a sharp increase in prices at the pump only last summer. The US is the world's largest consumer of petroleum products.
"We foresee not total shortages of gasoline but the possibility once again of regional supply imbalances and a lot of volatility in the market," said the report's editor, Klaus Rehaag. "Ultimately, we'll have enough supply but it could end up in the wrong place at the wrong time, especially if there are unforeseen circumstances" such as problems with pipelines or refineries, he said from Paris. Lawrence Eagles, head of commodity research at London brokerage GNI, said the agency's prediction of potential trouble in gasoline markets was no surprise.
"It's a valid point," he said, noting that many refineries have temporarily curtailed production due to the need for seasonal maintenance. "There's not enough capacity producing gasoline at the moment," he said from his office in Northern Ireland.

Last spring US refineries were so busy making heating oil that they were slow to shift to producing gasoline. Regional shortages of gasoline were the result, causing retail prices to spike in several parts of the United States. However, Peter Gignouxof Salomon Smith Barney said fears of a gasoline shortage this time around were not yet justified.
"There are some legitimate worries, but I think some advocates of higher gasoline price are a little overzealous," he said. Gignoux, head of SSB's petroleum desk in London, argued that refineries were enjoying "terrific" profit margins. "This should make refiners buy crude and make gasoline." Analysts said it would take a few more weeks before the prospects for gasoline prices this summer became clear.
Major importers drew down on their existing oil inventories for the third consecutive month in March, the IEA said, and this contributed to a firming up of crude prices during the second half of the month. Overall, prices fell sharply from their levels in February due to deepening fears about the American and world economies and the strength of future oil demand. The report said contracts of light, sweet crude fell by $ 2.44 per barrel in the United States, while contracts of North Sea Brent crude dropped by $ 3.13 per barrel in Europe.

Prices for gasoline and other refined products fell also, but by smaller amounts, the IEA said. Signs of economic weakness led the agency to revise its expectations for annual oil demand. It forecast this year's growth in demand to equal 1.33 mm bpd -- 6 % less than it had predicted.
Oil supplies increased in March by 1 % to 78.2 bn bpd. The biggest factor in the increase was Iraq, which boosted output by 530,000 bpd. The United States, Mexico and Britain also made substantial increases in production.
Supplies are likely to decrease this spring, with the 10 OPEC nations other than Iraq agreeing to trim their official output by 1 mm barrels effective April 1. The IEA noted that OPEC produced 650,000 bpd above its March target, and it suggested that this quota busting helped keep crude prices lower than they would have been otherwise.
The IEA estimated the average world demand for oil at 77.3 bn bpd during the first three months of the year. It said demand would decline during the second quarter by 2.4 bn barrels, then rebound during the second half of the year.