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Fuel Marketer Intelligence: Supply Chain Dynamics to Retail Fuel Prices

Preliminary data indicates gasoline demand in the United States reached a record weekly high in June, and travel demand over the Independence Day holiday weekend is expected to climb to an all-time peak, as historically low retail gasoline prices for early summer stimulate road travel.

After six straight weeks with an increase, US retail gasoline prices declined during the week ended June 27, with the regular grade average at $2.329 gallon and all grades at a $2.432 gallon average the lowest for the summer driving season since 2005, based on data from the Energy Information Administration.

The decline in retail prices came four weeks after the gasoline futures contract on the New York Mercantile Exchange registered a seasonal peak at $1.6664 gallon, with spot wholesale prices in bulk trading in the physical market indexing off the futures contract. Nearest delivered RBOB futures, the acronym for reformulated blendstock for oxygenate blending, stumbled 7% in June to $1.5014 gallon, trading in a $1.4589 by $1.6452 gallon range during the month.

The selloff in June might strike some as odd, considering US implied demand has been strong, registering a record high weekly rate of 9.815 million bpd in mid-June, while up 3.9% in 2016 through June 24 against the comparable year-ago period, according to EIA data. The decline into the July RBOB futures expiration was also booked as the travel group AAA forecast a 1.2% increase in road travel for the Independence Day holiday weekend from year prior to a 36 million person record high.

“We are well on our way for 2016 to be a record-breaking year for summertime travel,” said Marshall Doney, AAA president and CEO. “This trend is welcome news for the travel industry and a sign that Americans are taking to our nation’s highways and skies like never before.”

Economic indicators in the US also suggest strong driving demand would endure, with consumer spendin...