Late January Gulf Coast gasoline crack spreads reach lowest levels since 2014: EIA

HOUSTON, March 5 (Xinhua) -- U.S. Gulf Coast gasoline crack spreads in late January declined to their lowest levels since 2014, the U.S. Energy Information Administration (EIA) said on Tuesday.

EIA said U.S. Gulf Coast gasoline crack spreads had been declining since mid-2018 and briefly went negative in January and early February 2019 before rising. The gasoline crack spread is the difference between the spot prices of gasoline and crude oil.

More costly crude oil inputs and high gasoline inventories have contributed to the relatively low gasoline crack spreads, according to EIA.

Since December, prices of medium and heavy crude oils with higher sulfur content have increased relative to prices of light, sweet crude oils. This price increase is likely because of the reduction in output from producers within the Organization of the Petroleum Exporting Countries (OPEC) and Canada and the threat of production disruptions in Venezuela.

In addition to higher crude oil costs, high gasoline inventory levels have also led to the decline. In the U.S. Gulf Coast, a region with 34 percent of the nation's motor gasoline storage capacity, gasoline inventories reached an all-time high of nearly 91 million barrels for the week ending Jan. 11, which was 12 percent higher than the five-year (2014-2018) average.

Outside of the United States, gasoline inventories are relatively high in several major global storage hubs, further contributing to low gasoline crack spreads.

According to EIA, gasoline crack spreads typically decline to their lowest levels of the year in the winter months, but this winter has seen some of the lowest crack spreads on record.

Crack spread refers to the overall pricing difference between a barrel of crude oil and the petroleum products refined from it. Essentially, refiners want a strong positive spread between the price of barrel of oil and the price of the refined products, meaning a barrel of oil is significantly cheaper than the refined products.