Published on Thursday, June 5 2025
Authors : Tom Kloza Senior Associate and Chief Market Analyst

Last weekend represented the commencement of meteorological summer in the northern hemisphere.

Entities such as the Energy Information Administration widen the summer driving season to the period between April 1 and September 30, but most refiners and marketers regard June, July, and August as the critical months that typically bring substantial seasonal increases in demand.

This year is complicated by the OPEC+ effort to unwind some of the production cuts of the last two years. On Saturday, May 31, OPEC+ stuck to its plan to put another 411,000 b/d of oil on the market come July. If the cartel matches that pledge, it will have increased overall production by 1.37 million b/d by the time August rolls around.

Reaction in global markets was immediately neutral-to-bullish.  While the consensus view holds that crude oil supply will modestly outpace crude oil demand over the next two calendar quarters, much of the production increase from OPEC+ is expected to be consumed domestically for power generation during the summer months. This limits export availability and dampens the overall impact on global supply balances.

Additionally, part of the market’s muted response reflects the IEA’s recent upward revision to historical demand, suggesting that physical balances were tighter than previously estimated. As a result, inventory builds are likely to remain modest.  But perhaps more importantly, August is projected to mark the peak of global oil consumption, with July following closely behind.

“Summer,” which we’ll define here as June, July, and August, can be very unpredictable. For contemporary examples, one needs to look no further than U.S. refining input numbers and U.S. gasoline consumption.

U.S. refiners at one point were running nearly 1 million b/d less crude and feedstock than at the end of May 2024. That deficit was cut to less than 400,000 b/d more recently.  The loss of Lyondell’s Houston Refining (268,000 b/d) is irretrievable, but a canvas of refinery runs across the country suggests that second-quarter maintenance activity was much more intense than had been predicted. Much of that maintenance is now wrapping up.

One year ago, the last measurement of May held up as the high-water mark for refinery runs throughout all of 2024.

The last two EIA reports underscore one of the contemporary realities of EIA reports. Numbers rendered weekly tend to be very lumpy. Reports that are issued close to national holidays are particularly uneven.

Few analysts believe that U.S. gasoline demand advanced to a 7-month high of 9.452-million b/d in the fourth week of May and then collapsed to the meager 8.263-million b/d in the May 30 term. But higher resolution 4-week averages do indeed suggest a consumption slowdown. Implied gasoline demand stands at just 8.788-million b/d in the latest 4 weeks, down 3.1% from the same 4 weeks in 2024. The extraordinarily poor recent demand number just knocked year-to-date measurements to a small 0.2% deficit to same period last year.  

It’s notable that last June, July, and August (2024) brought seven weeks where total U.S. refinery input topped 17 million b/d. But unlike 2023, which delivered a Bactrian camel-shaped gasoline market—with a second hump of strength in August/September that pushed up outright prices and cracks—summer 2024 looked more like a Dromedary: a single early-season peak. Gasoline demand and pricing both hit their highs unusually early, in April, before flattening through the traditional driving season.

June clearly begins with plenty of processing incentive to run at high rates. Notwithstanding the threat of margin compression in the middle of the second quarter, most regions of the country find gasoline fetching much wider margins than were witnessed in the previous decade. In round numbers, various blends of motor fuel are commanding about $20/bbl over crude in the critical Gulf Coast market. History suggests these returns are likely to shrink in the next 15-45 days.

Last year was quite unusual in that the published level for May refining represented the apex of input. That is unlikely to be the case this summer. The particularly robust May consumption numbers in 2024 are anomalous. Conventional wisdom suggests that June, July and August should see higher consumption trends, but that was not the case in 2024. The only other recent year with a May peak for consumption peak was 2022 but that occurred against the special summer backdrop of $5/gal gasoline numbers that clearly inspired seasonal demand destruction.

All calendar recordings this decade are of course skewed by COVID. But for a broader perspective, the ten years between 2010 and 2019 saw four seasonal demand peaks in July, three in June, and four took place in August. The statistical average peak occurred very close to the actual summer solstice.

With previously mentioned numbers in mind, here are items to monitor closely over the next 90 days:

–		Global oil traders are quite confident that the world will top 105-million b/d of overall petroleum demand this summer, most likely peaking in August. That should support crude oil prices, until large inventory builds accrue from September through December.
–		Peace initiatives in Ukraine are clearly on hold and last weekend saw some of the most aggressive drone campaigns staged on Russian soil. Progress in this area is clearly bearish but early winter enthusiasm about a resolution has given way to lots of pessimism about talks.
–		Yes, hurricanes may clearly be the most dynamic wildcard but oil markets have never really been roiled by June or July tropical threats. Pencil August in for the most scrutiny. It will bring the 20-year anniversary of Katrina. Some petroleum exports are up more than tenfold from what was witnessed in 2005.
–		The second gasoline rally two years ago was tied to extreme heat across the Pacific Northwest, the Rocky Mountains and the U.S. Gulf Coast. Most Texas and Louisiana refineries can run at high rates with triple digit temperatures, but extremes are capable of knocking runs down by several percentage points.
–		The 2023 summer featured a lot of “storm-chasing” in RBOB futures. Speculators added to outright long positions or played front/back contract spreads as a means of hedging storm-induced interruptions. That storm-chasing action was NOT observed in 2024.
–		The world is another year closer to the impact of clean gasoline and diesel produced by the behemoth 650,000 b/d Dangote refinery in Nigeria. Current and future numbers imply that the industry is NOT expecting on-spec gasoline in time for the 2025 driving season from Nigeria nor Mexico.
–		Major changes for butane blending are anticipated in 2026 but the FERC tabled suggestions to ratchet butane content lower this August and September. It should be business-as-usual in terms of boosting third quarter gasoline inventories with cheaper components.

 

 

 

 

 

 

 

 

 

 

 

All these factors suggest an orderly start for summer oil without the wild swings that characterized the first 100 days of 2025. Without storms, U.S. gasoline prices may find a summer stasis and trade some 10- 40 cents/gal below the $3.50-$3.60/gal numbers that prevailed last summer. But those levels will clearly be inclined to move sharply lower between the autumnal equinox and the winter solstice.