By Brian L. Milne, Refined Fuels Editor, Telvent DTN
Initially moving up and reaching a two-week high on June 15, New York Mercantile Exchange RBOB gasoline futures reversed course and tumbled to a nearly one-month low on June 17, setting the stage for retail gasoline prices to continue moving lower. NYMEX RBOB futures serve as the U.S. price benchmark for wholesale gasoline, so its direction typically drives these costs.
The wholesale market was wiped around last week between forecasts for a tightening global oil supply-demand balance as the year progresses and worries that debt trouble in Greece would have a contagion effect and threaten the global economic recovery. Meanwhile, U.S. indicators on manufacturing and consumer confidence continue to paint a frightful picture for the U.S. economy, raising the specter that the slowing pace of the recovery could worsen. Such a turn would further harm U.S. employment, with the U.S. unemployment rate already at a high 9.1%, and cut into gasoline demand.
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For the second consecutive month in May, gasoline deliveries, a measure of demand, fell from the prior year, down 0.7% from last year at 9.2 million barrels per day, the American Petroleum Institute said June 17 in the latest edition of its Monthly Statistical Report. Deliveries slipped to an eight-year low for May when skipping May 2009.
API said that reformulated gasoline demand, used in metropolitan areas, was down 6.1% in May compared with last year.
“Consumers of gasoline may have been adjusting to higher prices by increasing use of public transportation, more telecommuting, more purchases of fuel efficient vehicles and cutting down on discretionary travel,” said API chief economist John Felmy, in commenting on the report.
Through June 13, the Energy Information Administration reported five consecutive weeks in which the U.S. retail gasoline average fell. During that period, it dropped 25.20 cents since reaching a 32-month high of $3.965 gallon on May 9 to $3.713 gallon. We should expect the EIA to report its sixth straight weekly decline this week.
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 15 years as an analyst, journalist and editor. He can be reached at [email protected]