April will be critical month for US gasoline market: EIA

Washington (Platts)--5Apr2006


April will be a critical month in determining the direction of US
gasoline prices going into the summer driving season as the market copes with
refinery maintenance and prepares for the phase-out of the gasoline additive
MTBE, the US Energy Information Administration said Wednesday.

Gasoline prices have started out strong in April, rising by an average 9
cents/gal between March 26-April 3 to a nationwide $2.59/gal. But it is
difficult to determine if prices will continue to increase throughout the
month and into the summer, or if prices will hold near current levels, EIA
said in its This Week in Petroleum Report.

"An important factor influencing gasoline markets this month will be the
degree of refinery maintenance," EIA said, noting that some analysts are
projecting refinery maintenance in April to be much larger than in recent
years, both for distillation and upgrading units.

If this projection pans out, it will likely mean big draws of gasoline
storage stocks, which since January have been in above-average range, said
EIA, the statistical arm of the US Department of Energy.

"Should gasoline inventories draw another 8 million barrels over the next
four weeks (an average draw of 2 million barrels each week), certainly
possible if the projections of large refinery maintenance hold true, they
would end the month just above the bottom end of the average range," EIA
commented. "Were such a decline relative to normal levels to occur, upward
pressure on prices would be expected."

But if refinery maintenance is not as great as expected and the remaining
refinery outages caused by last year's hurricanes come back online this month
as others expect, then inventories might not draw significantly in April, the
agency noted.

"Should refinery gasoline production keep gasoline inventories from
drawing this month, the increase in supplies could limit upward price
pressure, perhaps keeping retail prices from continuing to rise throughout the
month," EIA commented.

The agency said it expected "some more clarity by the end of the month"
about the other key factor influencing US gasoline markets -- the transition
from MTBE to ethanol in some reformulated gasoline, particularly along the
East Coast and in some cities in Texas.

"It is expected that due to the removal of the federal oxygenate mandate
in early May, refiners, pipelines, and other users of MTBE will have mostly
made alternative plans by the end of April," EIA said. "Perhaps by the end of
April, we will have also seen a significant shift in volume from the NYMEX RFG
futures contract towards the newer RBOB (reformulated blendstock for
oxygenate blending) contract, thus providing more clarity about gasoline
futures prices."

--Cathy Landry, cathy_landry@platts.com

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