Will Bears Dominate Bulls in the Crude Oil Market?

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Part 7
Will Bears Dominate Bulls in the Crude Oil Market? PART 7 OF 7

Why US Gasoline Demand Is Important for Crude Oil Prices

US gasoline demand

The EIA (U.S. Energy Information Administration) reported that the weekly US gasoline demand rose 320,000 bpd (barrels per day) to 9,118,000 bpd from October 14–21, 2016. US gasoline demand rose 3.6% week-over-week. US gasoline consumption hit a record in September 2016. For more, read September US Gasoline Consumption Hits Record for This Time of Year.

Why US Gasoline Demand Is Important for Crude Oil Prices

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US gasoline prices hit $1.14 per gallon on February 8, 2016, the lowest in 12 years. As of November 1, 2016, prices had risen 29.8% from the lows in February 2016 due to the increase in gasoline demand.

Rising demand partially supported crude oil prices as well. Crude oil prices rose 78.0% for the same period. For more on crude oil prices, read Part 1 of this series. 

US gasoline consumption estimates for 2016 and 2017 

The EIA estimates that US gasoline consumption will average 9,340,000 bpd in 2016 and 9,390,000 bpd in 2017. Those figures would be the highest annual average gasoline consumption figures on record for both years. US gasoline consumption averaged 9,180,000 bpd and 8,920,000 bpd in 2015 and 2014, respectively.

Rising gasoline consumption should support gasoline and crude oil prices. High gasoline and crude oil prices could have a positive impact on the earnings of refiners and oil producers such as PDC Energy (PDCE), Cobalt International Energy (CIE), Valero Energy (VLO), Northern Oil & Gas (NOG), Denbury Resources (DNR), Tesoro (TSO), and Northern Tier Energy (NTI).

Moves in crude oil and gasoline prices also impact funds such as the VelocityShares 3x Long Crude Oil ETN (UWTI), the ProShares Ultra Bloomberg Crude Oil (UCO), the PowerShares DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x ETF (ERY), the United States Gasoline ETF (UGA), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the Vanguard Energy ETF (VDE), and the PowerShares DWA Energy Momentum ETF (PXI).

Read Monthly US Crude Oil Production: Lowest Level since May 2014 for more bullish drivers. Read Major Banks Downgrade Crude Oil Prices despite OPEC DealWorld Bank Thinks OPEC Production Freeze Will Impact Crude Oil, and Will Crude Oil Prices Test 3 Digits Again? to learn about crude oil price forecasts.

For our ongoing analysis, visit Market Realist’s Upstream Oil and Gas page.


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