US Gasoline: Tight Balance; Fair Value For Now

US gasoline markets are tightening significantly due to a sharp drop in imports and refiners prioritizing distillate production over gasoline. While the current crack spread of $35/bbl reflects much of this tightness, risks remain for a spike toward $50/bbl if supply issues persist through the summer.

Key Takeaways

• 1.US gasoline inventories are drawing faster than seasonality, projected to fall below 200 mb by late August.
• 2.Refinery economics favor distillate production over gasoline due to a ~$25/bbl spread, limiting gasoline supply recovery.
• 3.The July RBOB-Brent crack spread is near fair value at $35/bbl, with risks balanced between further upside and geopolitical easing.

Table of Contents

• Key Takeaways
• United States
• Summary
• Physical market: tight and still tightening
• Price: already discounts the central inventory draw
• How the market clears — four mechanisms
• Signposts
• Conclusion
• Disclosure Section

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