US Products Outlook-Gasoline seen up as oversupply peaks

NEW YORK, March 3 (Reuters) - Gasoline values will have an upward bias near-term in hubs east of the Rockies as oversupply peaks, but dumping of remaining winter grade barrels may keep some markets volatile, traders said.

"It seems like we may have worked through the worst. Buyers are coming in and running the market up," said a trader in New York Harbor, where gasoline differentials were seen recovering after being pressured recently.

Refinery turnarounds across the nation will help lower supplies of gasoline, which have climbed to a 14-year high according to latest government data. In the Gulf Coast refinery row, the seasonal change in gasoline grades is also expected to drive gasoline values up this week.

"The Gulf Coast is now summer grade and you can store it. Ditto on (Midwest's) Group," he added, referring to the contango in NYMEX gasoline futures -- in which May is higher than April, making it economic to hold barrels in storage.

Gasoline inventories have seen large builds, with U.S. government data for the week of Feb. 22 showing total U.S. gasoline stockpiles grew to 232.6 million barrels, more than 9.0 million barrels higher than the three year average.

But market watchers say the big surplus of barrels will start to clear ahead of the driving season.

On Monday, values for M2 summer-grade gasoline inched up a about a penny in the Gulf.

Oil traders say both conventional and reformulated RBOB gasoline price differentials in the Gulf Coast, New York Harbor and the Midwest may edge higher over the next two weeks.

"The extreme oversupply in the gasoline market should should be at a peak," noted a market watcher.