No US gasoline glut looming: Marathon

OREANDA-NEWS. February 05, 2016. Refinery maintenance and strong global demand will pull US gasoline inventories down from a record high reached last week, limiting concerns of an oversupply, Marathon Petroleum said today.

Unseasonably poor diesel margins have led US refiners to produce as much gasoline as possible. Implied US demand for gasoline has held stronger than average through January despite winter storms, but total gasoline inventories have climbed higher by 22mn bl since the beginning of the year, according to the Energy Information Administration.

Winter refinery maintenance, which will cut production, and export opportunities will help refiners draw inventories down ahead of the switch to the summer gasoline season, which requires a more rigorous specification than winter fuel, the company said.

Refiners have watched the margins carefully but Marathon Petroleum was not yet concerned about a gasoline oversupply, chief executive Gary Heminger said today during a conference call to discuss earnings. Diesel remained the more likely drag on refining profits early in 2016, he said.

"We don't see any issues today, any need for immediate run cuts," chief executive Greg Garland said during a conference call to discuss earnings. "It's something we certainly will watch going into the second half of the year."

Gasoline made up 50pc of Marathon Petroleum's total output during the fourth quarter, and 48pc of its production throughout 2015. It was the company's highest outright gasoline volume in at least three years. Diesel made up 33pc of output in the fourth quarter and 31pc for all of 2015.

Same-store gasoline sales across Marathon's 2,766-store Speedway system fell slightly in the fourth quarter, although the company attributed that in part to its overall retail growth strategy. Marathon Petroleum expects US gasoline demand to increase 1pc this year.

Exports, particularly to Latin America but also Asia Pacific, supported the high gasoline runs, said Mike Palmer, senior vice president of supply, distribution and planning. The refiner exported 330,000 b/d in the fourth quarter, although he declined to say how much of that volume was gasoline.

"That's probably one of the reasons the gasoline make is so high," Palmer said.

Planned maintenance will also pull down gasoline production, beginning in the US Gulf coast, the company said. Marathon Petroleum has work underway at its 475,000 b/d Texas City, Texas, refinery, part of broader industry maintenance in the region during the first quarter.

"Part of the build that you see is in order to handle the shortfall that we're going to have when those refineries go down," Palmer said.

Marathon Petroleum reported a \\$187mn profit for the quarter, down by 77pc from the same quarter last year. The company reported a \\$2.9bn profit for 2015, higher by 13pc from 2014.