May 5 (Reuters) - U.S. gasoline inventories are drawing down sharply, heading toward historical summer lows, as a collapse in imports and shifts in refinery yield tighten supply, Morgan Stanley said in a Monday note.
In their base case, analysts at the bank see U.S. gasoline inventories falling to around 198 million barrels by the end of August, below the trough reached during the 2022 energy shock and the lowest level for this time of year in modern data.
The tightening comes as the global oil supply shock linked to disruption around the Strait of Hormuz increasingly feeds into U.S. gasoline markets.
Imports fell to an all-time weekly low in the week to April 10, with May arrivals from Europe set to stay well below the typical 3-4 million barrels, the bank said.
Refining behavior has reinforced the tightness, as U.S. refiners continue to favor diesel and jet fuel production over gasoline due to stronger distillate margins, the noted added.
Morgan Stanley also noted that exports have added further pressure, as they remained elevated through April, running above year-earlier levels as demand from Latin America, particularly Mexico, and parts of Europe continued to pull U.S. supplies.
Pricing already reflects much of the tightening, Morgan Stanley said, with July gasoline margins trading near $35 a barrel, close to the $40 a barrel level implied by the bank's inventory forecast.
The bank sees risks around this outlook as broadly balanced, with an upside of another $10–15 a barrel if geopolitical risks around the Strait of Hormuz persist, potentially pushing margins back toward levels seen in 2022.
Conversely, a faster rebound in imports, easing geopolitical tensions or signs of demand destruction could quickly pressure margins lower.
Reporting by Pablo Sinha in Bengaluru; Editing by Ronojoy Mazumdar
