(John Kemp is a Reuters market analyst. The views expressed are
* Chart 1: tmsnrt.rs/1mHXpdq
* Chart 2: tmsnrt.rs/1mHXtd7
* Chart 3: tmsnrt.rs/1mHXuhk
* Chart 4: tmsnrt.rs/1VMv8i9
By John Kemp
LONDON, Jan 7 The 10.6 million barrel jump in
U.S. gasoline stocks last week, reported by the Energy
Information Administration on Wednesday, sent gasoline futures
tumbling 4 percent and intensified the selloff in oil prices.
Estimated gasoline consumption was also down 1.2 million
barrels per day (bpd), over 13 percent, compared with the prior
week, adding to market alarm about the health of fuel demand.
But most of the increase in stockpiles and apparent drop in
fuel consumption was likely due to year-end seasonal quirks
rather a sign of slackening consumption.
The latest data on gasoline consumption, production and
stocks are for the week ending on Friday Jan. 1 and straddle
In the previous five years, from 2010/11 to 2014/15,
gasoline stocks increased by an average of more than 6 million
barrels over the year end period, with increases ranging from
3.6 million to 8.1 million barrels.
Estimated consumption declined by an average of around
500,000 bpd between the last week of the old year and the first
week of the new, ranging from a decline of 34,000 bpd to as much
as 805,000 bpd.
The reported decline in consumption and increase in
stockpiles last week was somewhat larger than usual but broadly
in line with the seasonal pattern.
Gasoline stocks reported by the EIA include both finished
motor gasoline and unfinished gasoline blending components which
must be blended with ethanol before sale to motorists.
Blending components include reformulated blendstock for
oxygenate blending (RBOB), conventional blendstock for oxygenate
blending (CBOB) and gasoline treated as blendstock (GTAB).
In recent years, refiners have produced mostly blending
components which are sold to terminals in local markets for
blending rather than finished motor gasoline.
Ethanol absorbs water, which can cause problems with fuel
quality, so gasoline is normally stored and transported by
pipeline as blendstock and then blended with ethanol in local
markets shortly before to sale.
Gasoline blending components accounted for 203 million
barrels, more than 87 percent of the total gasoline stockpile
reported last week, compared with just 29 million barrels of
Blending components also accounted for four-fifths of the
increase in stocks last week, increasing by 8.9 million barrels,
compared with an increase of just 1.6 million barrels in
finished gasoline stockpiles.
The rise in reported stocks was therefore really a rise in
the amount of gasoline held by refiners and especially blenders
prior to blending, and stocks of blending components typically
increase sharply over year-end.
In the previous five years, stocks of blending components
increased by an average of between 6.7 and 8.0 million barrels
in the week straddling the old year and the new, with increases
ranging from 3.2 million to 10.0 million barrels.
The reported increase in gasoline blendstocks last week was
therefore in line with normal movements at this time of year.
DELAYED ETHANOL BLENDING
In the last couple of weeks of the old year and the first
couple of weeks of the new one, refiners and blenders delay
blending in the ethanol and increase their inventory of
The result is a big drop in the "net input" of gasoline
blending components at refineries and blending terminals during
the final two weeks of the old year and the first two weeks of
the new one. It is followed by a sharp rise in net input later
in January as blending resumes (tmsnrt.rs/1mHXpdq).
There is a corresponding increase in stocks of blending
components at the end of old year and the beginning of the new
one, and a draw down later in January when blending ramps up (tmsnrt.rs/1mHXtd7).
Production of finished gasoline tends to drop sharply over
the year-end period as the blending of components to make
finished gasoline is delayed (tmsnrt.rs/1mHXuhk).
Finally, there is a big drop in reported gasoline
consumption during the final couple of weeks of the old year and
the first couple of weeks of the new one, followed by an
increase later in January.
EIA does not measure gasoline consumption directly but
rather estimates it from the amount of gasoline that disappears
from the reporting system.
Estimated gasoline consumption ("gasoline supplied to the
domestic market") is calculated from gasoline production plus
imports minus exports minus the change in stocks.
Because gasoline stockpiles tend to rise over the year-end
period, estimated consumption tends to fall.
On average, estimated consumption has fallen by almost
650,000 bpd between the third week in December and the second
week in January over the last five years (tmsnrt.rs/1VMv8i9).
The decline in estimated consumption has ranged from as
little as 288,000 bpd in 2012/13 to as much as 1.2 million bpd
in 2013/14. Last week's reported decline of 1.2 million bpd is
within the normal seasonal range.
All or almost all of the large changes in gasoline
production, consumption and stocks reported last week can be
explained by seasonal changes rather than any decline in demand.
(Editing by David Evans)