By: Alex Hodes, Energy Analyst - KC Energy
As of mid-May 2026, U.S. fuel markets are entering demand season with an unusual imbalance between gasoline supply and refining output. Gasoline inventories are not rebuilding at the typical pace, even as consumption begins to rise, creating a disconnect in seasonal dynamics. At the same time, refiners are responding to stronger margins in alternative fuels, shifting production priorities away from gasoline. This divergence is increasing the risk of tighter supply conditions just as demand accelerates.
Alex Hodes, Director of Energy Market Strategy at StoneX, has extensive experience analyzing refining trends and fuel market dynamics across U.S. energy markets. His role tracking refinery economics and product-level supply shifts gives him direct insight into how margin signals influence output decisions during critical seasonal transitions.
Refining margins are driving a clear shift toward distillate production as U.S. refiners respond to stronger profitability signals. Alex Hodes notes that "refiners are still kind of taking advantage of the elevated refining margins on diesel and jet fuel", highlighting how margin incentives are shaping output decisions. As a result, gasoline production has taken a secondary role during the early part of the season, delaying the usual replenishment cycle. This shift is increasing the likelihood of tighter gasoline supply as demand will accelerate into the summer months.
Gasoline supply is lagging behind seasonal expectations as inventory drawdowns outpace replenishment heading into peak demand. Hodes explains that "we've seen this really aggressive drawdown rate", even though inventories began the season above historical norms. This dynamic suggests that refiners may need to adjust output quickly if demand rises as expected during the driving season. In turn, delayed supply responses could amplify price volatility and increase pressure on both consumers and policymakers.
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--- Written by Frédéric Guétin, StoneX TV Producer
--- Expert: Alex Hodes, StoneX Director of Energy Market Strategy
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