Have US Gasoline Prices Peaked?
Monday June 6, 2016
Fuel Marketer Intelligence: Supply Chain Dynamics to Retail Fuel Prices
Gasoline consumption in the United States this year is expected to climb to a record high, yet aside from some remaining pass through costs the US retail gasoline price average might be nearing a short-term peak as surplus inventory caps the upside.
Gasoline supplied to market has been strong, running 382,000 bpd or 4.3% above the 2015 pace this year through May 27 per Energy Information Administration data, and registering its second highest weekly demand rate in 2016 at 9.716 million bpd during the week leading up to the Memorial Day holiday weekend. The previous high in refinery gasoline shipments to market for the year at 9.755 million bpd was logged during the second week of May.
Now in the summer driving season in the United States when gasoline demand peaks, unofficially kicking off with the Memorial Day weekend, we should expect the weekly gasoline implied demand rate to remain strong. Low retail gasoline prices should continue to underpin demand growth for the road transportation fuel despite climbing 60.3cts or 33% from a late February low to $2.44 gallon on May 30, according to the EIA’s national gasoline average.
Still, gasoline demand sits on the other side of supply, and there’s plenty to be found. At 238.6 million bbl on May 27 inventory is in surplus, up 18.3 million bbl or 8.3% from the comparable week a year ago and 26.5 million bbl or 12.5% more than the five-year average.
In financial gasoline trading, an ongoing pullback in expectations for higher prices by speculators is a sign the pre-season gasoline futures rally has run its course while a flattened front end of the forward curve in the calendar spreads illustrates the price pressure by bloated inventory.
The most recent data from the Commodity Futures Trading Commission shows noncommercial traders, also referred to as speculators since they are not buying a futures contract to hedge an underlying position in the physical market, have reduced a net-long position in gasoline traded on the New York...