By Brian L. Milne, Energy Editor, Schneider Electric
Wholesale gasoline costs were mostly lower at major metropolitan markets across the U.S. coming into December, slipping on building supply and weaker demand, with gasoline consumption failing to get a sizeable jump during the Thanksgiving holiday.
Implied gasoline demand did reach weekly summer demand levels leading up to the busy Thanksgiving holiday period data from the Energy Information Administration (EIA) shows, but held below 9 million barrels per day (bpd). Moreover, preliminary data shows demand tumbled during the week-ended the day after Thanksgiving to the second lowest weekly rate since mid-March.
There is the potential for implied demand, which reflects product supplied to market, to decline during a holiday due to pre-positioning supply ahead of the travel period. And we are in the holiday season, when travel picks up, so we could see a quick rebound following this decline. However, the steep drop in weekly gasoline demand figures follows a trend of weakening consumption this year, with implied demand down 3.4% in 2012 versus the comparable year-ago period.
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U.S. gasoline supply is also recovering, jumping to a 3-1/2 month high in late November from historically lower than usual inventory levels, with the increase supported by climbing output in the New York Harbor region hard hit by Hurricane Sandy. Phillips 66’s 238,000 bpd Bayway refinery in Linden, NJ, was the last of six refineries with either output cut or completely shut ahead of Sandy to come back online following the storm.
The ongoing recovery in the New York Harbor’s oil infrastructure coincided with the end of the fall maintenance season for U.S. refineries. The U.S. run rate, which refers to the output rate of U.S. refineries compared against installed input capacity, increased to 88.6%, a 10-week high, and above the 87.4% average so far this year.
The EIA’s U.S. average for regular grade gasoline inched up less than a penny during the week-ended Nov. 26 to $3.437 gallon, snapping six consecutive weeks with a decline in which the average tumbled 42.1 cents or 10.9% in value. Look for the average to hover near that value for the next couple of weeks.
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 16 years as an analyst, journalist and editor. He can be reached at [email protected].