The inventory build is in part due to refiners ramping up production earlier than usual, in Kilduff’s view. However, the increase is somewhat unusual for this time of year and remains a concern because gasoline is heading into a period when it should be the “seasonal leader” among energy commodities, he said.
On Wednesday, U.S. gasoline futures were down 1.7 percent, while U.S. crude futures were slightly positive on the day after the EIA report.
“To the extent that this is going to undermine gasoline price strength, it’s bad for the complex,” Kilduff said.
Tom Kloza, global head of energy analysis at Oil Price Information Service, noted that international benchmark Brent crude has recently gone further into contango, a structure in which the future price of a commodity is higher than the current cost. That is the opposite of what one expects when the market is tightening, he said.
OPEC and 11 other oil-exporting nations including Russia are currently trying to reduce a global glut by cutting 1.8 million barrels a day of production in the first half of 2017. But Kloza said high U.S. refinery activity risks worsening a glut of gasoline, diesel and jet fuel.
