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US gasoline prices fall again

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by Laura Sanicola

(Reuters) – U.S. gasoline prices rose earlier this month, but are falling again after West Coast refinery cuts ease and seasonal demand plummets.

Prices fell after a week of recovery after the Organization of the Petroleum Exporting Countries and its allies announced plans to cut the OPEC+ production target by 2 million barrels per day.

President Joe Biden plans to sell the last of 180 million barrels of crude from US strategic oil reserves by the end of December. Biden’s Democrats hope the move will help the party gain a weak majority in both houses of Congress in the November midterm elections.

Not all prices go down. US diesel prices have soared in the last two weeks due to higher global demand, lower inventory levels and lower production in Europe due to refinery strikes in France.

WHERE ARE FUEL PRICES NOW?

The national average is $3.85 per gallon, up 18 cents from its mid-September low of $3.67 per gallon, but fell from highs reached two weeks ago.

The price of diesel rose 33 cents last month and is now $5.32 per gallon, according to data from the U.S. Energy Information Administration.

According to federal data, the United States uses approximately 9 million barrels of gasoline and approximately 3 million barrels of diesel per day.

U.S. oil refineries are working hard to replenish their low inventories, even when there are cold sets that often correspond to a drop in fuel demand. The four-week moving average of gasoline demand is 2.4% lower than this period last year, while refinery use is 5% higher.

U.S. gasoline prices soared earlier this year, peaking in June after Western sanctions on Russian energy products and global refinery capacity plummeted following pandemic-related closures.

WHAT AFFECTED PRICES?

Last month, US gasoline prices rose largely due to regional refinery cuts on the west coast and Midwest. In California, costs increased by more than $1 per gallon last month, while in Texas prices are lower than they were a month ago.

Refinery maintenance usually takes place in the fall, when demand drops after the summer driving season. This fall, however, some refineries had to shut down units without warning due to infrastructure problems.

Three refineries in Washington state and California were scheduled for maintenance, while another refinery suffered an unplanned outage in September, according to Refinitiv data and refinery sources. In the Midwest, BP-Cenovus’ Toledo refinery is still down after a deadly explosion that shut the plant down late last month.

In October, several French refineries closed as workers went on strike to combat the high cost of living that has slashed global distillate stocks and boosted U.S. distillate exports.

US oil refineries were using 89.5% of capacity as of last week, which is still seasonally high. U.S. overall refining capacity has slumped since the coronavirus pandemic knocked down demand in early 2020.

Gasoline produced to meet California’s environmental codes dropped nearly 2 gallons in the Los Angeles and San Francisco wholesale markets last month due to increased supply, traders said.

WHAT ARE OTHER FACTORS AFFECTING FUEL PRICES?

Tight refining supply has kept the gap between wholesale gasoline futures and retail prices currently at about $1.25 per gallon, well above the average of 88 cents over the past five years.

U.S. retail gasoline demand was sluggish over the summer, but recovered last month, according to federal data. This limited inventories as US gasoline inventories remained at an eight-year low. Additional refinery disturbances can push prices up by further compressing this inventory.

(Reporting by Laura Sanicola and Stephanie Kelly; Editing by David Gaffen and David Gregorio)

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