Wholesale gasoline costs at major metropolitan markets across the U.S. advanced during the final week of January, boosted by greater-than-expected demand and an unexpected decline in inventory while exports increased.
Higher costs for supply are set to push the Energy Information Administration’s U.S. retail gasoline price average higher, which declined for three consecutive weeks through Jan. 27 when the national average slipped to a $3.295 gallon five-week low.
Implied demand for gasoline surged 525,000 bpd to 8.584 million bpd during the week-ended Jan. 24, according to the EIA, more than 110,000 bpd or 1.4% higher than the five-year average, while moving off a one-year low. Gasoline demand is weakest this time of year, and was depressed in early January by bitter cold and snow for large parts of the country. The weekly demand surge likely reflects pent up demand to some degree.
The big jump shown in preliminary demand data was accompanied by an 800,000 bbl drawdown in domestic gasoline inventories to 234.4 million bpd for the same week, narrowing its surplus with the five-year average from 7.7 million bbl to 4.8 million bbl. Analysts expect gasoline supply to build well above demand in 2014 as refiners increase processing of growing US oil output, while exports from Europe and Asia put more gasoline on the water.
EIA’s report also showed US gasoline exports increased 88,000 bpd or 17.7% to 586,000 bpd during the week ended Jan. 24. U.S. refiners, which operate some of the world’s most sophisticated facilities, are poised to continue exporting higher volumes of refined fuels as they take advantage of lower costing US crude compared with world prices.
The bullish fundamental data points come as the refinery turnaround season begins.
Broader economic data readings have been mixed, with China data showing slowing growth for the world’s second largest economy and consumer of oil, faring far better in the US. The Bureau of Economic Analysis said Jan. 30 in its advanced reading that US Gross Domestic Product for the fourth quarter 2013 grew at a 3.2% annualized rate, with sentiment building that economic growth for the U.S. would accelerate this year.
Nearest delivered New York Mercantile Exchange RBOB futures rallied to a one-month high at $2.6892 gallon Jan. 30 ahead of the February contract’s expiration Jan. 31 on the supportive data on fundamentals and economic expansion for the U.S. The March contract is now nearby delivery, moving gasoline closer to spring demand. April RBOB held an 18cts to 19cts premium over nearby delivery through January.
About the author
Brian L. Milne is the Energy Editor for Schneider Electric—a global specialist in energy management. Milne has been focused on the energy industry for 18 years as an analyst, journalist and editor. He can be reached at firstname.lastname@example.org.