Peak demand season is approaching, and gasoline stocks are plummeting. Prices are also rising.
As the summer driving season begins, U.S. motorists can expect an increase in gas prices as the conflict in Iran pushes oil prices up and forces countries to rely on American energy.
Gasoline demand peaks during the summer when Americans embark on road trips and other types of travel. Gasoline stocks are relatively high, which has protected U.S. motorists from the worst of supply disruptions caused by the Iran War and the closure of the Strait of Hormuz.
This could change. Data released by the government?on Wednesday revealed a drop of 6.08 million barrels in gasoline stocks last week. This is part of an overall massive drawdown in U.S. Energy inventories, as countries turn to America for supply. Last week crude oil exports reached a new record, which helped to drive prices up. Prices are now over $100 per barrel.
EIA data show that gasoline stockpiles have fallen by 5.98 million barrels or almost 3% from the five-year average. The refinery production remained relatively stable week-over-week, at just below 90% utilization.
We're heading in the wrong direction with gasoline stocks as we enter summer driving season. We can't build up stocks to prepare for the summer driving season. Bob Yawger is a managing Director at Mizuho.
According to AAA, the national average retail price of gasoline reached $4.229 per gallon on Tuesday, its highest level since July 2022.
The supply crisis is being exacerbated by refinery outages on the U.S. Gulf Coast and in the Midwest. BP's Whiting refinery, which produces 440,000?bpd of gasoline per day, was affected by a power failure on Sunday. Shell's Norco refinery located in Louisiana experienced a fire Tuesday. According to GasBuddy analyst Patrick De Haan, the Whiting power outage is expected to cause prices to rise above $5 per gallon in parts of the Midwest.
Costs at the pumps are expected to increase further in other places, especially as oil prices continue to remain above $100 per barrel. Brent crude futures traded at $118.34?a barrel on Wednesday, an increase of $7.08 per barrel. U.S. crude was trading at $106.35 a bar, a gain of $6.42.
On Wednesday, gasoline?futures rose 5% to $3.7423 per gallon. This was their highest price since 2022.
If we continue to raise gasoline prices, we will eventually see a reduction in demand. It's not quite happened yet in the U.S. Dennis Kissler is the senior vice president for trading at BOK Financial. He said that it usually takes another month or so before we can see a real drop in demand from U.S. consumers. (Reporting from Liz Hampton in Denver; Arathy Sommesekhar and Shariq Jao in Houston; and Hugh Lawson in New York)
(source: Reuters)
