By Brian L. Milne, Refined Fuels Editor, Telvent DTN
Wholesale costs for gasoline moved sharply higher during the first week of March, pushed up primarily by technical trading underpinned by bullish sentiment. Gasoline exports to Canada and Chile also supported a higher wholesale market.
Higher wholesale costs are seen pushing retail gasoline prices up across the country into mid-March.
Seasonally, gasoline prices move higher from late winter into late spring amid a transition to more environmentally stringent fuel specifications and anticipation of climbing demand as the weather improves. This expectation combined with what is referred to as a technical breakout on the charts, with gasoline futures-a financially traded gasoline contract spiking to an 18-month high and above a key “resistance” level.
The crack through the key resistance level at $2.208 gallon opens the door for much higher values, with the gasoline futures contract rallying 9 cents in less than a week after topping the closely watched price point. The charts suggest another 25 cents advance still to come by May.
The rally in gasoline prices does defy a well supplied market while demand remains tepid. However, the market is bullish on expectations for demand to recover as the economy improves, with recent data on jobs supporting that view.
View DTN’s Weekly and Historical Gas Prices.
The Department of Labor said March 5 that 36,000 people lost their jobs in February while the unemployment rate was unchanged at 9.7%. That was much better than the market had expected, anticipating heavy snowstorms in much of the country, especially the heavily populated regions in the Midwest and East Coast to trigger more job losses and an increase in the unemployment rate.
The wholesale market was also supported in early March by exports shipped to Canada amid refinery downtime for maintenance north of the border as well as to Chile following a massive earthquake in the Andean nation. Two refineries were shut by the 8.8-magnitude earthquake, prompting the need for Chile to seek imports.
About the author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN-a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for more than 14 years as an analyst, journalist and editor. He can be reached at firstname.lastname@example.org.