Higher demand coupled with the refinery maintenance season have prompted a string of weekly drawdowns in gasoline supply.
By Brian Milne, Energy Editor for Schneider Electric
Gasoline supplied to the primary wholesale market in the U.S. poked above the five-year average for the fourth week in 2014, climbing to 8.996 million bpd during the week-ended April 4 per data from the Energy Information Administration (EIA), while consistently topping year ago demand since late February.
The year over year increases in the preliminary consumption figures resumes the accelerated demand thrust seen late last year before the brutality of the 2013-2014 winter set in, disrupting demand for motor transportation fuel.
Higher demand coupled with the refinery maintenance season have also prompted a string of weekly drawdowns in gasoline supply, which have declined each week since mid-February, last reported at 210.4 million bbl as of April 4. That’s the lowest supply on-hand since mid-November, while the stock level has been at or below the five-year average since the beginning of March.
These two features coincided with a rally by the New York Mercantile Exchange crude futures contract to a $104.44 bbl five-week high on the spot continuation chart on April 11 to boost the paper value for gasoline last week. The nearest delivered Reformulated Blendstock for Oxygenate Blending futures contract on NYMEX rallied to a five-week high April 11 at $3.0381 gallon, up 8.31cts on the week.
The late week rally by NYMEX RBOB futures was also boosted by short covering after speculators reduced long positions in the contract for the third straight week through April 8 and from a nearly one-year high in net-length. Combined with higher ethanol costs, which reached record highs in late March, early April, the pre-season rally has more gas in the tank, so to speak.
The EIA’s national retail gasoline price average registered a $3.596 gallon seven-month high on April 7, with the Beltway analysts projecting a $3.66 gallon monthly average for May in their Short-term Energy Outlook released April 8.
In its monthly outlook, EIA expects a national average of $3.57 gallon from April through September, with September’s average seen at $3.46 gallon. For full year 2014, EIA pegs the U.S. average at $3.45 gallon, down six cts from 2013.
If realized it would be the fourth consecutive year in which the average declined annually, with EIA expecting the trend to continue in 2015, forecasting a $3.37 gallon average. Climbing crude production is pressuring domestic gasoline prices, providing an economic stimulus for the U.S. unexpected as recently as five years ago.
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 email@example.com.