Forget all about that supply of high quality shale crude (NYMEX:CLK14) for a moment as refiners have a string of issues that is increasing gasoline (NYMEX:RBK14) prices. This come as the Wall Street Journal is raising concerns about a surge in U.S. gasoline exports.
The Wall Street Journal reports that "drivers in the U.S. are facing rising gasoline prices ahead of summer-vacation season, just as refiners here are shipping more gas to other countries. A new pipeline, built to release a glut of crude oil that was stuck in the middle of the country, is now feeding oil to refineries on the Gulf Coast that churn out gasoline and diesel. While these fuels still make their way to the Southeast and the East Coast, growing amounts are being sold to Mexico, the Netherlands, Brazil and other countries."
The Journal points out that "Gasoline stockpiles nationwide are at their lowest point for this time of year since 2011, according to the U.S. Energy Information Administration. Meantime, the retail price for a gallon of regular gasoline averaged $3.68 on Monday, up 4.2% from a year ago, according to the EIA. That is the highest price since March 2013. AAA had the average price on Monday at $3.67.
Gasoline futures climbed 1.1% to $3.0869 a gallon Monday on the New York Mercantile Exchange and are up 11% for the year. Prices for the futures, which are contracts to buy or sell at a specified price and time, are a leading indicator for prices at the pump and don't reflect the impact of taxes and other components of retail prices. While seasonal factors often account for rising gasoline prices ahead of summer, when millions of Americans hit the road for long car trips, the prospect of more gasoline being shipped overseas plays a prominent role in the current rally, analysts say."
The Journal says that "Total petroleum exports, mostly gasoline and diesel, averaged about 3.6 million barrels a day last week, according to the EIA, up 25% from the same period last year. The figure includes a small amount of oil exports that are allowed by the U.S. government, which effectively banned them in 1975."
Of course there has been an incentive for the United States to export in part because of the broken RIN market. RIN regulations have increased the incentive for refiners to export gasoline without having to worry about RIN credits.
Also refiners have to prepare to better take advantage of the bounty of crude that the shale is providing. This will be a hot issue going forward. Gasoline popped yesterday on Bloomberg reports of refining problems. The refinery in Port Arthur, Texas, is shutting units for 10 days of unplanned work, causing reduction of operating rates, according to person familiar with operations. Crude unit known as VPS-4 and catalytic reforming unit known as CRU-4 will be shut beginning April 25.
Oil might get a boost on a report by Dow Jones that China's central bank said Tuesday that it will reduce the share of deposits that some rural lenders need to set aside as reserves, in a move aimed at giving a lift to economic growth. Dow says that the People's Bank of China cautioned that the move doesn't suggest a change in monetary policy but said it would increase lending to the agricultural sector. The reserve-requirement ratio, or the percentage of deposits that must be kept as cash with the central bank, will be cut by 2 percentage points for county level rural commercial banks and trimmed by 0.5 percentage point for rural cooperatives, the PBOC said in a statement on its website. Beijing said last week it would lower the reserve requirement ratio for some qualified rural banks, but it didn't provide details."
The Ukraine is still an issue as the U.S. State Department says it has photographic proof that Russian Special Forces are behind the unrest in the country. In the meantime an EU accord to sanction Russia is in question. Maybe Vice President Joe Biden can fix it.