Jobs Report Brightens Dimming Optimism Over Demand

By Brian L. Milne, Energy Editor, Schneider Electric

gas_pumpsThe gasoline futures contract that trades on the New York Mercantile Exchange rallied to a nearly one-month high early in the May 6 session, bolstered by the Labor Department’s May 3rd nonfarm payroll report showing greater jobs growth than expected for April and a decline in the national jobless rate to a more than four-year low at 7.5%.

The improving job’s picture for the U.S., which came with upward revisions in monthly job totals for both February and March, spurred gasoline futures higher on expectations demand for the fuel would improve.

The more people that work implies greater demand for gasoline, according to a longstanding corollary on their interrelationship. Discretionary spending, with higher spending bolstering gasoline demand, also improves when more people are working and when they feel they have greater job security.

The May 3rd report had followed less than inspiring economic data from the European Union, China and the U.S. that had prompted selling of fuel contracts on worry over oil demand. This year would also be the fourth in which bullish prospects for the US economy seen early in the year dissipate as we reach the second quarter. April’s nonfarm payroll report worked to refute a repeat of the scenario realized in 2010, 2011 and 2012, if only temporary.

View Schneider Electric’s Weekly and Historical Fuel Price Index.

Before the May 3rd report, which surprised the market and triggered a rally in equities including major indices such as the Dow Jones Industrial Average reaching a new all-time high, gasoline futures had tumbled to a 4-1/2 month low.

Whipsaw futures trading for gasoline, which trades as Reformulated Blendstock for Oxygenate Blending or RBOB, makes it difficult to gauge the change in the national retail gasoline average reported by the Energy Information Administration.

EIA’s weekly U.S. gasoline average was last reported on April 29 at a better than three-month low of $3.52 gallon. It was the ninth consecutive weekly decline in EIA’s average for all formulations of regular grade gasoline, which is 31cts less a gallon than it was during the comparable year-ago period.

The U.S. gasoline average is positioned to halt the series of weekly declines and inch higher in early to mid-May.

About the Author
Brian L. Milne is the Energy Editor for Schneider Electric—a leading business-to-business provider of real-time commodity information services among many other activities. Milne has been focused on the energy industry for 17 years as an analyst, journalist and editor. He can be reached at brian.milne@telventdtn.com.

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