More Downside for Retail Gasoline Prices

By Brian L. Milne, Refined Fuels Editor, Telvent DTN

Wholesale gasoline costs were mixed in metropolitan markets across the U.S during the final week of April, but retail gasoline prices should continue moving lower in early May.

At $3.87 gallon on April 23, the Energy Information Administration’s US average for retail gasoline prices was at a five-week low. The retail average has fallen for three straight weeks in April, and is poised to again decline.

View Telvent DTN’s Weekly and Historical Gasoline Price Index.

Data from the Commodity Futures Trading Commission through April 24 show noncommercial participants also known as speculators cut their net-long position in New York Mercantile Exchange RBOB (Reformulated Blendstock for Oxygenate Blending) futures to a three-month low, with a long position taken in the anticipation that prices will move higher. The fading support for higher gasoline prices came with sluggish demand and exacerbated by a several news items, including the possible sale of two out of the three refineries in and near Philadelphia that were slated for permanent closures.

Part of the reason for the first quarter price run up in gasoline prices was concern of a possible short market in the New York Harbor due to the lost refining capacity, with the Harbor also the delivery location for the RBOB contract. The possibility that two of the refineries might be bought and remain in service triggered selling.

Weak gasoline demand is another feature currently weighing on gasoline prices, with preliminary data from the EIA showing implied gasoline demand down 6% in 2012 through April 20 compared with the corresponding period a year ago.

On April 27, the EIA said it expects gasoline demand in the US this summer to be at an 11-year low.

EIA projects gasoline demand to average 8.8 million bpd this summer, which it defines as the period from April through September. This would be the lowest demand rate since the summer of 2001, while down 6.4% from the record demand rate achieved in 2007 at 9.4 million bpd.

The projection anticipates gasoline demand being reduced due to increase use of fuel efficient vehicles. The EIA also thinks higher gasoline prices, which are seen nearly a quarter per gallon above 2011 summer prices, to also cut into the consumption rate.

EIA says global crude costs continue to be the primary driver in pushing up gasoline prices at the pump.

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 16 years as an analyst, journalist and editor. He can be reached at brian.milne@telventdtn.com.

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