Preseason Rally for US Gasoline Futures so far Muted

Article by Brian L. Milne, Energy Editor, Product Manager with Schneider Electric

The wholesale US gasoline market is in the midst of its seasonal transition from winter-grade gasoline to the more costly to produce summer-grade product, and demand is expected to increase as the warmer weather encourages driving. This is the time of year when gasoline futures advance toward their annual high, and futures are climbing, yet based on historical data are demonstrating less oomph then might be expected.

Called reformulated blendstock for oxygenate blending, the gasoline futures contract traded on the New York Mercantile Exchange ended March with seven consecutive sessions with an advance, with the nearest delivered futures contract rallying 9.5cts or 6% during the week-ended March 31. Still, the now expired April contract remained below the $1.7257 gallon 18-month high on the spot continuous chart registered March 1, as concern over subdued gasoline demand capped the upside and pressed the contract to a $1.5623 gallon March low.

The seasonal chart shows NYMEX RBOB futures trading at a premium to 2016’s price performance, while trailing 2015’s values. In 2016, RBOB futures traded at an annual intraday high on May 24 at $1.6664 gallon, and in 2015 at $2.1858 gallon on June 17.

The gasoline futures contract is holding well below the 2011-2014 seasonal price patterns, with oil futures selling off hard during the second half of 2014 as a supply glut swamped the market. Now in its third year, a globally oversupplied market continues to limit price gains, although there are signs that the global oil market is drawing down inventory after three months of production cuts by the Organization of the Petroleum Exporting Countries.

OPEC and 11 non-OPEC oil producing countries agreed to cut their crude production by nearly 1.8 million bpd during the first six months of 2017, and OPEC compliance with their agreement has been strong at over 90%. Yet, US crude production has soared with higher global crude prices, which are again over $50 bbl. Since the start of 2017, US crude production is up 377,000 bpd to a nearly 14-month high of 9.147 million bpd, and is expected to continue to grow, mitigating the OPEC-led production cuts and capping the upside in fuel prices.

Gasoline futures did shift into a bullish backwardated market structure as May RBOB futures rolled into the nearest delivery position with the expiration of the April contract on March 31. A market is in backwardation when supply nearest to delivery trades at a premium to deferred delivery, with the price premium in a nearest to delivery contract occurring despite the storage and hedging costs associated with deferred delivery contracts.

Although in a bullish market structure, too much gasoline supply has weighed on the front end of the forward curve since 2016, limiting price gains in the wholesale and retail markets. In the primary wholesale market, physical supply is traded in bulk transactions as they move from the refinery gate to distribution terminals, with those trades indexed against the nearest or second nearest delivered futures contract.

Gasoline supply was drawn down in the fourth quarter and rebuilding early in the first quarter in agreement with the market’s seasonal tendency. On February 10, US gasoline supply reached a record high of 259.063 million bbl, according to data from the Energy Information Administration, with EIA weekly data dating back to 1990. Gasoline supply has been drawn down consistently since reaching the record high, down nearly 20.0 million bbl or 7.5% through March 24 to 239.7 million bbl, slipping 1.2% below the comparable week in 2016.

Seasonal refinery maintenance should continue the draw down through April, but will the decline in inventory be enough to buoy the flaccid preseason rally?

The answer will fall to demand, which so far in 2017 trailed year ago by a sizeable 380,000 bpd or 4.2% cumulatively through March 24 at 8.745 million bpd, according to data from the EIA. In 2016, implied gasoline demand averaged a record 9.35 million bpd.

US Gasoline Futures Drop Back in Spring Transition

Sliding from a 1-1/2 year high on the first day of March, the April gasoline futures contract rolled into the nearest delivery position in trading on the New York Mercantile Exchange, signaling the spring transition to more stringent fuel specifications.

Known as the Reformulated Blendstock for Oxygenate Blending contract, April RBOB futures rallied to $1.7257 gallon on March 1, the highest trade on the spot continuous chart since mid-August 2015, after settling 21.74cts above the now expired March contract on the last day of February. However, too much gasoline supply and weaker-than-expected gasoline demand in early 2017 pressed the April contract down more than a nickel to settle at $1.6780 gallon on March 1.

Will pricing in the wholesale gasoline market mimic the old Pennsylvanian maxim about March — “In Like a Lion, Out Like a Lamb?”

Gasoline supplied to market in 2017 through February 24 averaged 8.451 million bpd, down a steep 534,000 bpd or 6% compared with a similar timeline in 2016, while also below an 8.5 million bpd five-year average, according to data from the Energy Information Administration.

However, the statistic might be overstating the bearishness in consumption when you consider gasoline demand in 2016 reached a record high of 9.35 million bpd, while the current 2017 cumulative average is greater than in 2013 when it was 8.3 million bpd, above 2012’s 8.39 million bpd average, and tops the 2011 average of 8.19 million bpd.

Indeed, gasoline demand surged during the first three quarters in 2016 before tapering off in the fourth quarter as retail prices gained sharply. The U.S. retail gasoline average is currently more than 50cts higher than a year ago, reaching $2.314 gallon on February 27 for regular grade according to an EIA survey. Poor weather in California has also been credited in hamstringing gasoline demand in early 2017.

“This YOY declining trend actually began at the end of 2016 and has led to record levels of gasoline in storage and the lowest gasoline margins we have seen in some time. It is also causing refiners to review their operating strategies after running “full out” over the last couple of years to satisfy strong domestic and export demand,” writes Turner, Mason and Company in their most recent John Auers’ Turning Point blog.

Commercial gasoline inventory in the United States reached a record high of 259.1 million bbl on February 10, while drawn down roughly 3.2 million bbl over the following two weeks to 255.9 million bbl as of February 24, EIA data shows. Gasoline supply along the PADD 1 East Coast also reached a record high on February 10 of 76.3 million bbl, while down 1.3 million bbl to 75 million bbl on February 24. The high inventory level prompted some tankers ready to offload gasoline in the New York Harbor to be rerouted in February.

Analysts note March and April are peak months for unit shutdowns during the spring refinery maintenance season, with those outages set to help pare down the oversupply. Moreover, January and February are historically the weakest months for gasoline consumption, and as the weather warms driving demand will climb.

Wholesale prices look vulnerable to the downside in March nonetheless, as talk abounds in the market that some refiners will slash their offers to move out winter grade gasoline to make room for lower Reid vapor pressure product. RBOB futures forward curve through August delivery illustrates the likely cap on wholesale gasoline prices, with the modest contango–a market structure in which nearest delivery is priced at a discount to deferred delivery–at less than 7cts a gallon. August RBOB futures settled at $1.7468 gallon on March 1.

Another sign suggesting price weakness, noncommercial traders, also known as speculators since they are not buying a futures contract to hedge an underlying physical position in the market, have consistently reduced their exposure to higher prices since reaching a 10-month net-long high on January 18. Speculators have liquidated 30,134 or 34% of their long RBOB futures positions since reaching the high to 58,535 contracts as of February 21, the Commodity Futures Trading Commission shows in their weekly Commitment of Traders report, with a long position taken on expectations prices would move higher.

Until the oversupply clears, gasoline prices will be capped. However a robust U.S. economy and ongoing gains in employment could help accelerate the drawdown.

 

The stock market continued its tear, with the Dow Jones Industrial Average rallying through the 21,000 mark for the first time on March 1, and U.S. manufacturing expanded in February, with the Purchasing Manager’s Index climbing a more-than-expected 1.7 points to 57.7 according to the Institute for Supply Management, with readings above 50 indicating expansion.

At 4.8% in January, the national unemployment rate is at 10-year low, and the labor participation rate has ticked up 0.3% since Trump won the presidential election to 62.9% in January, although remains near its lowest point in 40 years.

The string of positive economic data has enlivened consumer sentiment, with the Conference Board, a private international company, reporting consumer confidence in the United States at a 15-year high in February. These data sets indicate consumers are bullish.

To learn more about Schneider Electric’s energy and commodity trading platform, DTN ProphetX click here.

Article by Brian L. Milne, Energy Editor, Product Manager with Schneider Electric

Gasoline Futures Surge 12% in December to New High

Article by Brian L. Milne, Energy Editor, Product Manager with Schneider Electric

The gasoline futures contract traded on the New York Mercantile Exchange surged 12% in December, with reformulated blendstock for oxygenate blending futures establishing a new calendar year high for 2016 at $1.7038 gallon between the Christmas and New Year’s Day holidays. Gasoline futures outpaced the advance by West Texas Intermediate and ULSD futures in December which both rallied 9%, as bullish sentiment took control of the market.

Spurring the market’s bullish psychology were agreements to reduce production by the Organization of the Petroleum Exporting Countries on November 30 joined by a companion pact on December 10 when 11 non-OPEC producing countries also agreed to cut output. Combined, the two agreements call for a 1.758 million bpd cut in production that, if adhered to, would push global oil demand over production midyear, according to several analysts including the International Energy Agency.

The agreements took effect January 1 and are for six-month terms, although country commitments call for an average at the quota level to be reached by June, so some production cuts might not start right away. This feature could puzzle analysts during the interim as they scrutinize monthly production data for compliance, likely sparking increased price volatility.

Noncommercial traders, also known as speculators since they are not using a futures contract to underpin a physical position in the underlying market, covered short positions and accumulated long positions in NYMEX RBOB futures in reaction to the November 30 agreement. A long position is taken on expectation prices would move higher over time.

A rebalancing market will still need to contend with an abundant quantity of oil in inventory. However, the production cuts would gradually chop down the mountain of supply that has grown over the past couple of years and, in turn, underpin a higher global oil price.

This expectation was lent support late in 2016 on a string of data suggesting a quicker expansion of the US economy in 2017, with the Bureau of Economic Analysis in late December reporting a 3.5% annualized growth rate in US gross domestic product for the third quarter 2016–the largest quarterly expansion in two years. Greater economic activity consumes more oil.

The US Federal Reserve lifted the federal funds rate in December for only the second time in 10 years on evidence it finds supporting a stronger US economy that, in large part, propelled the US dollar to a 14-year high. Consumer confidence in the United States reached a12-year high in December, with a new administration in Washington, DC, seen creating broader economic opportunity.

A confident consumer is willing to spend more of his or her hard earned currency which bodes well for fuel retailers. As we look at RBOB futures forward curve, we see an increasing premium built into gasoline prices in early 2017 which reach the mid to upper $1.80 gallon range in April, May and June.

Climbing gasoline prices could erect a speed bump to higher sales volume for retailers and suppliers alike in 2017 should demand slow, as witnessed in in late 2016. Although implied gasoline demand set a record high in 2016, demand slowed late in the fourth quarter against the comparable year-ago period as gasoline prices gained.

EIA data shows during the four-week period ended December 23, gasoline supplied to market averaged 9.045 million bpd that, while a strong reading, trailed the same four weeks in 2015 by 260,000 bpd or 2.8%. For the year through December 23, implied gasoline demand averaged 9.367 million bpd, up 211,000 bpd or 2.3% against 2015.

The US average for regular grade gasoline sold at retail outlets reached a six-month high of $2.364 gallon on December 26, according to EIA data, 32.5cts above year prior. The lower price point in late 2015 was seen incentivizing demand.

In a recent note to clients, Tim Evans, futures specialist with Citi Futures, highlighted gasoline demand’s response to prices, saying, a decline in gasoline prices in 2015 lent support to demand with growth up as much as 3.4% in the 12 months ended in September 2015.

“Since then we’ve seen a slowing to 2.0% growth in the 12 months through September 2016. Looking ahead to next year,” said Evans on December 22, “we would not be surprised if growth slows to something more like 1.0-1.5%, a more sustainable pace in our view.”

Gasoline exports from the United States, which are included in the products supplied statistic, surged in 2016, reaching a weekly record high of 1.1149 million bpd in late December. Moreover, the trend looks sustainable, as US refineries produce more gasoline than needed by the domestic market amid the country’s oil and gas renaissance.

Much of those exports have been shipped to Mexico, where growing domestic consumption joined refinery constraints and outages to spur the demand for US barrels. Mexico is gradually liberalizing its gasoline market, including on imports, which would aid US refineries that are producing well above their historical average.

To learn more about Schneider Electric’s energy and commodity trading platform, DTN ProphetX click here.

US Gasoline Prices Spike in Response to OPEC Deal

Article by Brian L. Milne, Energy Editor, Product Manager with Schneider Electric

The January reformulated blendstock for oxygenate blending futures contract on the New York Mercantile Exchange settled at a better than five-month high on the spot continuous chart in concluding its first session as nearest delivery on December 1, continuing a midweek rally ignited by an historic agreement by the Organization of the Petroleum Exporting Countries (OPEC).

After two sessions, which included the expiration of the December RBOB contract on November 30, nearest delivered gasoline futures had rallied 16.99cts or 12.3% to $1.5470 gallon. The previous high settlement on the spot continuous chart was reached during the summer driving season on June 23 at $1.6035 gallon, less than 10 days after US gasoline demand reached a weekly record high of 9.815 million bpd, per data from the Energy Information Administration.

During their biannual meeting in Vienna on November 30, OPEC agreed to a 1.2 million bpd cut in their production to 32.5 million bpd that takes effect January 1, with the agreement creating a surge in futures trading.

The Chicago-based CME Group reported single-day volume traded in Energy-Complex products on November 30 at a record high 4,510,408, well above the previous record of 3,932,201 contracts on February 11. NYMEX West Texas Intermediate futures volume spiked to 2,530,530 contracts, soaring past the prior record of 1,861,909 contracts set the day following the presidential election on November 9.

WTI futures with nearest delivery topped $50 bbl for the first time in nearly six weeks on December 1, rallying $5.82 or 12.9% in two sessions to a $51.06 bbl settlement, and could test resistance near $60 bbl in the coming weeks.

Volatility in oil futures is expected to increase further following the OPEC agreement, which cuts production for the first time in eight years. OPEC expects another 600,000 bpd in production cuts from non-OPEC members, with Russia reportedly agreeing to reduce output by 300,000 bpd.

The quota agreement has a six-month term, with OPEC to review its affect and market conditions in May 2017.

The market will closely watch OPEC members for cheating, with the cartel having a checkered past in complying with quotas. Also, the 32.5 million bpd production quota, the low end of a pledge made by members in Algiers on September 28, doesn’t include Indonesia, which suspended its membership, so the production cut is less dramatic than the headline number. Secondary sources report Indonesia produced 722,000 bpd of crude oil in October.

The agreement is nonetheless significant and seen aided by strong growth in oil demand from the United States. However, the upside in crude values is also expected to be limited, given ongoing excesses in global oil supply, with US commercial crude inventory at 488.1 million bbl on November 25, 30.9 million bbl or 6.8% more than the comparable year ago period, data from the EIA shows.

Moreover, US shale oil producers whom have already been reactivating rigs that helped boost domestic production to an 8.699 million bpd 5-1/2 month high during the Thanksgiving Day holiday week and 271,000 bpd above a 26-month low plumbed in the final days of the second quarter, are seen as benefactors of OPEC’s cut. Many more wells are seen economical with WTI at $55 to $60 bbl that would add oil to the market and slow the draw down in bloated inventory.

Gasoline economics are healthy in the United States amid ample crude supply and strong demand both domestically and for exports. Statistics from the EIA for September, the most recent monthly data available, shows U.S. refinery and blender net production of finished gasoline was 10.3 million bpd in September, 303,000 bpd above a year ago.

“Refinery output remains strong even in the late fall; the first two weeks of November had a net output of 10.5 million b/d and 10.2 million b/d, respectively, compared with output of 9.7 million b/d and 9.6 million b/d for the same weeks last year,” said EIA in a weekly report November 30.

After nearly 11 months, gasoline supplied to the primary market has averaged 9.394 million bpd, 250,000 bpd or 2.7% above the corresponding period in 2015. EIA shows gasoline exports averaged 564,000 bpd in September, up 208,000 bpd from September 2015, with 60% of the country’s gasoline exports that month sent to Mexico.

Another dynamic in a busy November for the oil market was an increase in the required amount of renewables in the transportation sector from a May proposal. On November 23, the Environmental Protection Agency finalized the 2017 Renewable Volume Obligation for the nested renewable fuel category which is overwhelmingly satisfied by conventional corn-based ethanol at the 15 billion gallon statutory level, 200 million gallons more than proposed in May.

Tradable D6 Renewable Identification Numbers, credits obligated parties under the Renewable Fuel Standard–refiners, importers and blenders–submit to the EPA to show compliance again spiked above $1, surging nearly 30cts or 38% from a mid-November low to $1.07 on December 1.

The blend wall, which refers to the 10% maximum ethanol content level in gasoline that can be used in all vehicles on US roads, remains an impediment in adding more ethanol to the gasoline pool even as the mandate to do so expands, spiking RIN values.

In a November 28 blog from consulting engineers Turner, Mason & Company, they project ethanol in the gasoline pool at 14.771 million gallon or 10.18% in 2016 compared to 13.59 million gallons or 10.16% in 2012.

“The percentage of ethanol in the gasoline pool has stayed remarkably constant over the past five years. The general conclusion is that the blend wall is still a limitation and demand for E15 and E85 has not grown significantly,” explain the consultants.

To learn more about Schneider Electric’s energy and commodity trading platform, DTN ProphetX click here.

Recent Surprises Turn Oil and Gas Market Bullish

Article by Brian L. Milne, Energy Editor, Product Manager with Schneider Electric

Addressing recent events transforming the U.S. oil and gas market

Inventory Decreasing

Unexpected surprises continue for the U.S. gasoline market in 2016, this time with gasoline prices underpinned as an inventory surplus was sharply cut. The East Coast has been affected in particular, with gasoline supply plummeting from a 36-year high to a 21-month low.

With record high gasoline production holding supply well above the historical average in 2016, what has finally shifted the market from bearish to bullish?

OPEC Production Cuts

With an ongoing imbalance threatening to press global oil prices lower still, OPEC decided on Sept. 28 to cut production. Admitting that the imbalance of global oil supply-demand would indeed continue well into 2017, the 14-country member finally agreed to reduce production – the first cut in eight years.

Beginning this November, OPEC ministers have agreed to a production range between 32.5 and 33.0 million bpd in contrast to their August output of roughly 33.3 million bpd. Details to these cuts will come about when OPEC meets in Vienna on Nov. 30.

Colonial Pipeline Leak

On Sept. 9, a leak was found on the Colonial Pipeline’s 36-inch gasoline main line 1 in Alabama that disrupted service. Not returning to full service until Sept. 21, the Southeast north through the mid-Atlantic saw limited new gasoline supply which led to steep drawdowns in regional stocks.

This caused supply shortages, namely in the Southeast..

Natural Disasters

The first hurricane in 11 years to make landfall in Florida, hurricane Hermine disrupted shipping lanes and sea-to-shore off-loading after it hit on Sept. 2. This natural disaster drew dawn East Coast gasoline supply 2.284 million bbl to 64.894 million bbl during the week ending Sept. 2 and another 884,00 bbl by Sept. 9.

Both the pipeline and hurricane disruptions occurred in the midst of transition when refiners were moving out summer grade product to make room for winter grades – leading to a drop of nearly 6.0 million bbl in PADD 1C, the Lower Atlantic, according to the EIA. This drop in the region’s supply was the largest on record and well above the previous large drawdown in June of 2003 of 2.9 million bbl.

National Gasoline Outlook – Supply Demand Leveling

In light of a second hurricane in the past two months, this time Matthew – category 4, shipping lanes and pipeline service had again been disrupted. With East Coast supply taking another hit, gasoline prices have increased as decreasing supply combats the imbalance seen over the past year. This decrease in supply and climb in price has been another bullish factor underpinning higher fuel prices.

To learn more about Schneider Electric’s energy and commodity trading platform, DTN ProphetX click here.

Short Squeeze Rallies Gasoline in August

Fuel Marketer Intelligence: Supply Chain Dynamics to Retail Fuel Prices | Brian L. Milne, Energy Editor, Product Manager with Schneider Electric

August marked the second highest market participation rate for the Reformulated Blendstock for Oxygenate Blending futures contract traded on the New York Mercantile Exchange on record, with a sleepy oversupplied gasoline market enlivened by speculation of upcoming coordinated action by the Organization of the Petroleum Exporting Countries to boost global oil prices.

Data on futures positions from the Commodity Futures Trading Commission shows noncommercial traders, also known as speculators since they are not using the futures contract to hedge an underlying physical position, reduced a net-long position in RBOB futures in late July to the lowest point in more than a year. A long position is taken on expectation for prices to move higher, so the liquidation of these contracts by speculators indicates a bearish sentiment for the US gasoline market.

As discussed in our previous blog, Summer Hope Dashed as Gasoline Supply Swamps Market, the gasoline market was under price pressure in July on bloated inventory and despite peak seasonal demand, with demand on pace to set a record high this year. The long liquidation in July as evidenced in CFTC’s Commitment of Trader’s reports left the market vulnerable for a price rally.

The bearish sentiment for gasoline futures in ending July was appropriate given the market’s fundamental disposition. Despite record high summer demand, gasoline inventory had increased for three consecutive weeks through July 22 to reach a nearly three-month high of 241.5 million bbl, sitting 25.3 million bbl or 11.7% above the five-year average, data from the Energy Information Administration shows.

As the August RBOB futures contract expired on July 29, the market was also confronting the seasonal change that occurs in September, with gasoline demand consistently lower in September compared with August. Hope that low retail prices would spur enough demand to shrink the oversupplied market was evaporating, and speculators were selling out of the market.

Nearest delivered RBOB futures fell to a $1.2760 gallon four-month low on July 29, but pared the loss to settle at $1.3210 gallon. Twenty trading days later, nearest delivered RBOB futures rallied to a $1.5257 gallon two-month high, spurred by belief OPEC members would agree to freeze their production when they met in late September in Algiers for informal talks on the sidelines of the International Energy Forum.

CFTC data shows noncommercial market participants increased their net-long RBOB futures position 30.8% from July 25 to August 22 to a 57,829 near two-month high. The CFTC also shows RBOB futures open interest, which measures the number of unliquidated, outstanding contracts on a given day, surging above 400,000 in mid-August. The prevailing high was reached in March during the preseason rally.

Speculation for an OPEC agreement was fraying in late August following comments from Iraq, Iran and Saudi Arabia, not to mention that OPEC production was at an eight-year high in July and Saudi output reached a record high. Iraq indicated it would cooperate in the September talks, but continues to ramp up output, and Iran restated its goal of securing market share lost during years of Western sanctions on its exports, planning to ramp up production another 200,000 bpd. The Saudis said they don’t have a production target, with their output set by customer demand.

Weekly data from the EIA showing US commercial crude oil supply increased to a 525.9 million bbl two-month high on August 26 and US dollar strength joined the market’s diminishing expectations for meaningful action to be taken by OPEC to press NYMEX RBOB futures to its third consecutive session loss on August 31. The September RBOB contract expired down 3.61cts at $1.4122 gallon, although nearest delivered RBOB futures ended August 9.12cts or 6.9% higher.

October RBOB futures settled at a 7.88cts discount to the now expired September contract on August 31, reflecting the seasonal transition to slower demand and higher Reid vapor pressure gasoline, which is easier and cheaper to produce than the summer grades. The market’s again in position to test the July low.

Yet, as the short squeeze in August demonstrated, speculation could again reverse the market. OPEC is still scheduled to discuss coordinated action to stabilize oil prices in Algiers September 26-28, and hurricane activity in the Atlantic Basin peaks in August and September.

To learn more about Schneider Electric’s energy and commodity trading platform, DTN ProphetX click here.

End of Summer Sees Swamped Fuel Market, Low Prices

Schneider Electric’s Brian Milne addresses high supply and demand

Inventory Buildup in Gasoline

With U.S. gasoline inventory increasing through mid-summer, an unexpected buildup has occurred – upending the outlook for a balance between supply and demand during the second half of 2016. As of August 5, national gasoline inventory totaled   235.4 million bbl, according to the Energy Information Administration, 9.2 percent above year prior. Record high production and an above average import rate partly due to a strong dollar are both factors for the large supply overhang. Moreover, the market is oversupplied despite strong demand that’s on pace to set a record high in 2016.

What’s driving gasoline demand?

Gasoline Demand and Elasticity

Dropping below the year ago-weekly rate only three times since mid-May, data from the EIA shows a record pace for gasoline supplied to market. Cumulatively, U.S. implied gasoline demand is 3.7 percent above the comparable year ago period through the end of July and an astounding 7.0 percent more than the five-year average, a 614,000 bpd increase.

 This demand increase stems from low retail prices spurred by a high level of gasoline inventory and declining unemployment meaning more road travel, resulting in record high demand. The strong demand rate amid low prices and an improving employment picture serves as testament to gasoline’s elasticity in the United States

Why are US gasoline imports so strong when domestic supply is at a surplus?

A combination of high gasoline supply internationally and a strong dollar has lured more imports to U.S. shores.  Increased refining capacity in the Middle East and Asia has boosted the amount of available gasoline globally, bolstering competition among suppliers to boost US gasoline imports. Global economic headwinds have also prompted central banks around the world to lower interest rates and adopt policies to stimulate their economies that, in turn, weakens their currencies. In this environment, the US dollar has strengthened against rival currencies and attracted a higher level of gasoline imports than usual.

National Gasoline Price Outlook – Still Dropping

Oil prices remain volatile, but Milne expects crude prices to drop into a $35-$40 per barrel range as peak summer driving demand ends and refiners shut units for seasonal maintenance. With a current national average price of around $2.15 per gallon for regular grade in early August, gasoline prices are expected to slide another $.30 to around $1.85 per gallon late in the third quarter, early fourth quarter.

About Brian Milne

Brian Milne has been involved in energy for 20 years as a journalist, editor and analyst covering all types of US energy markets. He is the editor of Schneider Electric’s MarketWire—a real-time market and news service focused on US oil product markets and relevant news and analysis. Milne is frequently quoted in newspapers and trade journals, including the Wall Street Journal, Barron’s, USA Today, and MarketWatch.

 

Summer Hope Dashed as Gasoline Supply Swamps Market

Fuel Marketer Intelligence: Supply Chain Dynamics to Retail Fuel Prices

Gasoline futures swung to a five-month low of $1.2760 gallon in ending July business before paring the decline on technical-driven short covering ahead of the August contract expiration, with the low plumbed during peak seasonal driving demand in the United States amid a market awash in supply.

The national inventory of gasoline increased during July, and at a time when stocks are typically drawn down amid strong summer demand. The gasoline buildup was unexpected, and has upended a widely held outlook that the global market would reach a balance between supply and demand sometime during the second half of 2016. Continue reading Summer Hope Dashed as Gasoline Supply Swamps Market