By Brian L. Milne, Energy Editor, Schneider Electric
The U.S. retail average for gasoline prices is poised for an increase coming into the second week of December after the Energy Information Administration (EIA) reported a 2.1 cents decline to $3.272 gallon in its national average for the week-ended Dec. 2 amid higher wholesale costs, especially in the upper Midwest where supplier postings spiked 17.5 cents or more.
EIA’s US retail gasoline average declined for 10 consecutive weeks from Sept. 2 through Nov. 11 to a $3.194 gallon two-year, nine-month low before snapping the downtrend with two weekly advances in the average. At $3.293 gallon, the U.S. retail average was its lowest for the busy Thanksgiving Day holiday travel period since 2010.
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The upturn in wholesale gasoline costs comes with supportive fundamental factors and an upbeat economic picture, including a greater-than-expected 3.6% expansion of the U.S. economy in the third quarter and a drop in the national unemployment rate to a 7% five-year low in November.
Preliminary data from the EIA shows implied gasoline demand has topped the five-year average since early in the fourth quarter, holding above the average for eight straight weeks and counting, while up 1.3% during the first 11 months of 2013 at 8.762 million bpd versus the comparable year-ago period. Low retail prices and an improving U.S. economy explain the higher perceived consumption. Gasoline supply has narrowed its surplus with both the five-year average and year-ago period, now trending with its seasonal pattern.
A string of positive data for the US economy released during the first week of December underpinned gains for oil prices, with the Labor Department’s Dec. 6 nonfarm payroll report for November showing 203,000 new jobs were created and a drop in the U.S. unemployment rate rallied equities and bodes well for greater personal discretionary spending and improved demand for gasoline.
In futures trade, the Reformulated Blendstock for Oxygenate Blending contract traded on the New York Mercantile Exchange rallied from a better than 22-month low on the spot continuation chart of $2.4945 gallon Nov. 7 to a $2.7676 2-1/2 month high Nov. 22. Since then, the contract has consolidated within the mid-$2.60s to mid-$2.70s range.
NYMEX RBOB futures are used as the benchmark price in the spot market, with supplier postings at terminals across the country guided by spot pricing.
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 17 years as an analyst, journalist and editor. He can be reached at [email protected].