As oil prices continue to slip into the lower $40 range, now there is concern that the situation could result in the shutdown of some oil refineries.
As Bloomberg News reports, it could lead to a shortage of oil. When summer-time driving and gasoline demand drops in August and September, refiners in the past used it as a time to shut down for seasonable maintenance.
The U.S. Energy Information Administration indicates gasoline stockpiles are at their highest seasonal level since 1990 and it could force refiners to shut sooner and for longer periods well in advance of the Labor Day holiday.
“With gasoline supplies the highest since April, refiners may pull some projects forward,” Tim Evans told Bloomberg News. He’s an analyst at Citi Futures Perspective in New York. “This will take more support away from the market and add to the broader problem of excess supply.”
Right now the global oil market is reported to be “severely oversupplied” with gasoline and some analysts suggest it will weight on crude prices. Refineries have been turning out too much gasoline in recent months and as the summer driving season ends in September, they will have to reduce crude purchases, thus bringing down oil prices even more.