U.S. refiners until recently were confident that they could meet the surge in demand for gasoline. Now they say supplies should be adequate but very tight this summer.
Meanwhile, the continuing strong demand for gasoline and diesel fuel -- especially in preparation for the Memorial Day weekend -- helped push surging oil futures prices through the $16 barrier today for the first time since Valentine's Day.
Analysts said a shortness of supply of certain crude grades used to make distillates such as gasoline, jet fuel and heating oil was helping to support the recovery, along with technical market factors.
On the New York Mercantile Exchange, contracts for June delivery of West Texas Intermediate, the benchmark U.S. crude grade, closed at $16.16 a 42-gallon barrel today, up 48 cents from Thursday's settlement price.
The last time a near-month contract closed above $16 was Feb. 14, when the price settled at $16.01. It then dropped to hover at levels between $11 and $14 in March and April.
Earlier this month, however, the bulls took over.
On May 2, the price broke back through $14, to $14.73. Then, less than a week later, it passed the $15 mark, at $15.21, on May 7.
The most recent figures indicate that U.S. gasoline demand, which has risen sharply because of lower oil prices, is running ahead of the industry's ability to make it, at a time of the year when gasoline normally is being stockpiled for heavier demand in July and August.
"Right now, refiners' downstream operations where gasoline is produced is almost fully employed and we are not at the peak of the driving season," said Urvan Sternfels, president of the National Petroleum Refiners Association (NPRA).
Although no industrywide figures are available on gasoline production capacity, Amoco, the nation's largest gasoline retailer, says its refineries are running at 87 percent of capacity and it expects to peak this summer at about 90 percent.
The Energy Information Agency said that, in the four weeks that ended May 9, U.S. demand for gasoline was running at 7.03 million barrels a day. But according to the American Petroleum Institute, production is only 6.7 million barrels a day.
Sternfels said that means the industry has dipped into its gasoline reserves and has imported the fuel, or components of it, to fill the gap.
The current inventory level of 209 million barrels, or approximately 30 days' supply, is 35 million barrels lower than just three months ago.