Wholesale gasoline costs moved mixed in very choppy trading during the third week of September, with the benchmark futures contract slumping to a six-week low at one point before rebounding on renewed optimism for the global economy amid central bank stimulus measures.
A huge build in crude stocks reported by the Energy Information Administration for the second week of September sent oil prices tumbling, with an 8.5 million-barrel supply build in commercial inventory levels coming on a rebound in oil production and a surge in imports to the highest rate since the first week of January following production shut-ins and delayed cargo deliveries caused by Hurricane Isaac. Meanwhile, gasoline stocks hover near a four-year low.
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The market rallied late in the week on indications Spain would seek a bailout from the European Central Bank, with the anticipated action seen putting the 17-nation euro zone on surer footing that bodes well for oil demand. The market was back in selloff mode when it seemed that Spain might not ask for rescue funding, along with a contracting manufacturing sector in China—the world’s second largest economy and second greatest consumer of oil. Weakening business sentiment in Germany also weighed on oil prices, suggesting slowing global economic growth is further dampening export demand.
The Federal Reserve’s latest quantitative easing policy announced earlier this month is expected to support higher oil prices amid a weakening U.S. dollar, with QE3 adding to the country’s debt load as it looks to stoke higher employment. Countering that support are indications the Obama administration would release emergency oil from the Strategic Petroleum Reserve in an effort to pressure gasoline prices, although tapping the reserve should only occur during shortages.
The EIA’s U.S. retail price average for regular grade gasoline registered its 11th consecutive weekly increase through Sept. 17, climbing to a $3.878 gallon five-month high. Since July 2 when the advance began, the average has jumped 52.2cts or 15.6%, averaging a 4.75 cents weekly gain.
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 firstname.lastname@example.org.