According to the Financial Times, crude oil prices are being left to play catch up due to the second straight month of lower gasoline demand, and this is one market that traders are keeping a sharp eye on.
The EIA’s Short-Term Energy and Summer Fuels Outlook report suggests the market may have a hard time repeating last year’s record numbers. The report shows that gasoline demand fell 2.4 percent, to 8.988 million BPD in February. This followed January’s drop of 1.9 percent from last year.
By the end of the day on Friday, inventories of gasoline were high, with US refiners hitting record refining rates last week. The figures are supposed to be based on fuel demand, but the EIA indicates demand isn’t that hot, yet. We can add to this the fact that US gasoline consumption accounts for one out of every 10 barrels of oil consumed globally.
The benchmark US RBOB gasoline contract ( a term given to unleaded gas futures) dropped 1.5 percent to a two-month low of $1.5603 a gallon following the announcement of the huge rise in inventories. The supply and demand situation has caused retail prices at the pump to decline across the country.
AAA Texas on Thursday reported the average price of unleaded gas at the pump dropped three cents a gallon to $2.24 last week, while nationwide, the price has averaged out to be about $2.40 a gallon. Experts at AAA say the summer rise in traveling hasn’t started yet, however, demand is expected to rise over the next few weeks.
You can see how lower gasoline demand and higher inventories are keeping the price of crude oil from going up. International benchmark Brent was down 0.9 percent at $51.35 a barrel, while US benchmark West Texas Intermediate lost 1.0 percent to $49.10 a barrel.
“Since the oil complex topped out a little over two weeks ago it has been driven lower by RBOB which have lost almost 10 percent since April 10,” said Tamas Varga at oil brokerage PVM, according to the Financial Times. “As a comparison, WTI and Brent have fallen less than 8 percent during the same period.”