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A Bullish Week for Crude Prices and Refined Product Prices

PART:
1 2 3 4
Part 3
A Bullish Week for Crude Prices and Refined Product Prices PART 3 OF 4

Summer Driving Season Begins in April: Gasoline Prices Increase

Gasoline prices

US regular gasoline prices this Monday, May 4, were $2.664 per gallon. This represents an increase of ~3.7% from the price on Monday, April 27, which was $2.57 per gallon. It’s also a decline of ~28% from levels this time last year.

The EIA (U.S. Energy Information Administration) releases gasoline fuel price updates every Monday. These prices are national averages calculated by the EIA.

Summer Driving Season Begins in April: Gasoline Prices Increase

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An increase in gasoline prices is positive for the margins of refiners such as Phillips 66 (PSX) and Marathon Petroleum (MPC). Combined, these companies make up 2.6% of the iShares Global Energy ETF (IXC). Higher gas prices are also good for refining MLPs such as Northern Tier Energy (NTI) and CVR Refining (CVRR).

Gasoline prices are affected by gasoline inventory levels, which, in turn, are determined by supply and demand trends. Read Higher Gasoline Inventories in the Week Ended April 24 to learn more about last week’s trends.

Gasoline price forecasts

According to the EIA’s STEO (“Short-Term Energy Outlook”), released on April 7, the onset of summer driving season between April and September will contribute to an increase in US regular gasoline retail prices. We can expect to see the $2.46 per-gallon average in March rise to $2.50 per gallon in April, a 2015 peak if the forecast holds.

For the full year, the EIA is forecasting prices to average $2.40 per gallon. Prices averaged $3.59 per gallon in the summer of 2014. At these low prices, the EIA expects average US households to spend $700 less on gasoline this year compared to last year.

The next STEO is scheduled to come out on May 12.

Gasoline consumption in 2015

Lower prices have boosted EIA’s demand outlook. For the summer of 2015, it expects consumption to average 9.2 MMbpd (million barrels per day). That’s 0.14 MMbpd higher than levels last summer.

The EIA also revised its 2015 gasoline consumption growth figure upward by 70,000 barrels per day to 150,000 barrels per day. That’s a 1.6% increase over 2014’s consumption growth levels.

In the concluding part of this series, we’ll look at the latest developments in diesel prices.

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