Gasoline demand is accelerating, though the market may be in a wait-and-see mode before deciding on its next direction, analysts told Zenger News.
Travel club AAA reported a national average retail price of regular unleaded gasoline at $2.87 per gallon on Tuesday. It’s been at that point for the last month or so. A year ago, the price at the pump was about a dollar cheaper. But, at about the same time, the price for a barrel of U.S. crude oil dipped into rare negative territory as the COVID-19 pandemic ground the economy to a halt.
Crude oil prices account for the bulk of what consumers see at the pump. U.S. crude oil has long left negativity behind it, trading in the $60 per barrel range for most of the month.
Patricia Hemsworth, a senior vice president at Paragon Markets, told Zenger from New York that gasoline demand in the U.S. economy is accelerating. Last week, the federal government reported that the total volume of petroleum products supplied to the market, a proxy for demand, was well above year-ago levels.
That should push the price at the pump higher, though Hemsworth said pandemic strains elsewhere in the world leaves gasoline exporters looking to U.S. shores. It’s coming from everywhere, she said, noting the European Union’s current issues with the pandemic.
“The EU is in trouble regarding COVID, consumption in India too is expected to be down, so Asian supply might be looking for a home,” she said.
In its summer fuels outlook, the U.S. Energy Information Administration, part of the Energy Department, said the COVID pandemic is still a factor on demand, particularly with extended work-from-home policies, but markets are certainly better than last year.
The federal agency expects the retail price for regular unleaded will average $2.78 per gallon this summer, more or less where it’s at right now.
Patrick DeHaan, the senior petroleum analyst at GasBuddy, told Zenger from Chicago, that the market was more or less in a holding pattern.
“It’s hard to tell what lies ahead since this market is COVID-news dominated,” he said. ”It’s just a constant back and forth until we get some significant news to break us out of this rut.”
Demand for the next few weeks will likely be moderated as travel usually subsides between the Easter holiday, spring break and upcoming Memorial Day, which is the unofficial start of the summer holiday season.
Gasoline prices usually move higher during the summer months because of the costly processes needed to keep fuel from evaporating in the warmer weather. But for now, the market is more or less stable, Jeanette McGee, a spokesperson for AAA, said in a statement.
“Refinery utilization is nearly back to pre-pandemic levels, and with gasoline stocks seeing builds in the last month amid lower crude oil prices, motorists have benefited from mostly flat gas prices,” she said.
(Edited by Bryan Wilkes and Kristen Butler)