May 19 (Bloomberg) -- Surplus gasoline from Total SA’s European refineries can be absorbed by its trading division, even amid falling U.S. demand, according to Michel Benezit, the Paris-based company’s head of refining and marketing.

“We don’t have an immediate problem selling our gasoline produced in Europe because we have a strong trading division,” Benezit said in an interview yesterday in Paris. “U.S. demand for gasoline imports is lower, that is clear.”

U.S. daily demand for gasoline was 8.91 million barrels in the week ended May 8, a three-month low, and the recession is likely to keep it below normal levels even during peak months between late May and early September when people travel more.

The downturn is exacerbating a longer-term expected decline in U.S. gasoline import demand, linked to new refining capacity, greater energy efficiency and use of biofuels.

“The problem will get worse over the next decade,” Benezit said, adding that Total has various possible destinations for the fuel it refines in Europe. “We can also send it to our Mediterranean and Africa units,” he said.

U.S. crude-oil supplies fell 4.63 million barrels to 370.6 million in the week ended May 8, the first drop since February, the Energy Department reported last week.

“There is no driving season in the U.S. this year,” Benezit said. “Will it start up again? Will this change? It’s too early to say.”

French Steps

Forecast dwindling U.S. imports of European gasoline will lead to “lower refining margins, lower corporate profits and permanent refinery shutdowns,” Mike Wittner, head of oil market research at Societe Generale SA, said by e-mail. European processors “will reduce overcapacity, shutting smaller and less sophisticated refineries. It’s already started to happen.”

Total in March announced a plan to cut 555 jobs at its refining and petrochemicals operations in France, while investing 770 million euros in its Normandy refinery to boost diesel output and reduce production of gasoline.

“Long term it probably won’t be enough but it will give us the time to think about the next step if the market forecasts are confirmed,” Benezit said.

The French company, which owns six of mainland France’s 12 refineries, is implementing plans to raise diesel output 50 percent in the 10 years to 2015 by retuning plants to make more of the fuel without increasing crude consumption.

Export Surplus

Higher diesel demand in Europe has forced retailers to import from Russia, while excess gasoline is sent to the U.S. About 77 percent of new cars sold in France last year run on diesel, industry data show.

The French company estimates the European export surplus will reach 1 million barrels of oil a day by 2020, assuming U.S. refining capacity remains stable and biofuel usage increases. European gasoline exports, which have lagged U.S. imports for most of the past decade, already outstrip them, although by less than 200,000 barrels a day, according to Total estimates.

“Either that production has to be stopped or new markets found,” Benezit said.

European consumers have to import about 600,000 barrels of diesel a day from Russia and other former Soviet states, while producers are forced to export almost 1 million barrels a day of gasoline to the U.S., BP Plc said in November.

French refiners are 33 percent less competitive than the average in western Europe, according to the Union Francaise des Industries Petrolieres, or UFIP, an industry group.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

Last Updated: May 19, 2009 08:37 EDT