Crude oil is set to close out the week with a loss as worries over a glut of refined product inventories persist. The EIA did nothing to dispel those concerns this week, reporting another uptick in gasoline stocks, the fourth increase in five weeks. Those gains in inventories come even as June saw record gasoline demand in the U.S. as motorists failed to put a dent in the high levels of supply. Gasoline stocks ended June at their highest level since 1984 for the time of year. "The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion," UBS oil analyst Giovanni Staunovo, told Reuters.
Refiners set for worst year in five. Refiners have pumped out high levels of gasoline, diesel and other products at a rapid pace, hoping to meet strong demand from consumers. However, refined product inventories have climbed as processing has outpaced demand. That has also resulted in a sharp fall in refining margins, a poor outcome for the downstream sector. As second quarter results start coming in, 2016 is shaping up to be one of the worst years since 2011. Low margins will likely force refiners to cut back on output. That will reduce demand for crude oil, an ominous sign for WTI and Brent as we head into autumn. The 10 largest independent refiners earned a collective $944 million in the first quarter, a 74 percent decline from a year earlier, according to Reuters.
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