Global Gasoline Markets Soaring as Oil Surges to 7-Year High

(Bloomberg) -- Oil refiners across the globe are making robust profits from producing gasoline, with the demand outlook signaling continuing strength just as crude futures soar to the highest level in seven years.

Global stockpiles of oil products, which include motor fuel, are at a multi-year low for this time of the year. At the same time, people have been taking to the roads in greater numbers, boosting demand. That's helped keep profits from making gasoline well above seasonal norms in the U.S., Europe and Asia.

The strength seen in gasoline is being played out across most segments of the oil complex, from crude to diesel and even jet fuel in some regions. While it's a welcome boost to refiners that were hit hard during the pandemic as energy demand was eviscerated, it's feeding into inflationary pressure worldwide.

The Biden administration has released strategic oil reserves to try and tame rising energy prices -- with little impact -- while Japan is rolling out subsidies to refiners so that they don't pass on higher costs to consumers. On Sunday, Trade Minister Koichi Hagiuda said Japan would consider applying a trigger clause that would suspend taxation on gasoline if it rises above a certain level. The demand outlook is bullish, however, and that could lead to an even tighter market.

The International Energy Agency estimated global gasoline demand will near pre-pandemic levels this year, while earlier this month, Energy Aspects Ltd. predicted consumption will surpass that. The Energy Information Administration sees U.S. driving outpacing pre-virus levels in the second half.

Profits from converting oil to gasoline in the U.S. are at the highest level for this time of the year since 2013, while in Europe, the motor fuel's premium to crude is at its highest on a seasonal basis in at least three years. In Asia, margins are more than double the five-year seasonal average.

See also: Oil Refiner's Data Point to Impact of Gas Price Surge on Margins

Globally, inventories of light distillates -- a category that includes gasoline -- are at the lowest for this time of the year since 2018, according to FGE. China's reduction of fuel exports has tightened supplies in Asia, and in Europe, a key gasoline-making unit at Germany's second-biggest refinery has suffered an unplanned outage, while the continent's biggest plant is starting major works.

U.S. gasoline stockpiles have been replenished in recent weeks, but they still remain below the five-year seasonal average. American refiners are in the middle of a heavier-than-usual maintenance season, after putting off major work in the past few years, tightening supplies before summer.

The spread of the highly transmissible omicron variant raised some concerns about demand, especially in China, but the lack of hard lockdowns across the world this time has meant consumption has been barely dented. Even across China, people are traveling for Lunar New Year, despite the flare-up.