Gasoline Demand: Is It Bullish or Bearish for Crude Oil?
US gasoline demand
The EIA (U.S. Energy Information Administration) estimated that the four-week average US gasoline demand fell by 121,000 bpd (barrels per day) to 8,934,000 bpd from December 9–16, 2016. US gasoline demand fell 1.3% week-over-week and 3% year-over-year. The fall in gasoline demand is bearish for gasoline and crude oil (USO) (UCO) (RYE) (BNO) prices.
However, US gasoline consumption hit a record in September 2016. For more, read September US Gasoline Consumption Hits Record for This Time of Year. For updates on gasoline inventories, read the previous part of the series.
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US gasoline prices hit $1.14 per gallon on February 8, 2016—the lowest in 12 years. As of December 20, 2016, prices were up 39.5% from their lows in February 2016 due to the increase in gasoline demand.
Rising demand partially supported crude oil prices as well. Crude oil prices were up 100% 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 9,310,000 bpd in 2016 and 9,370,000 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 refiners and oil producers’ earnings such as PDC Energy (PDCE), Triangle Petroleum (TPLM), Valero Energy (VLO), Northern Oil & Gas (NOG), Tesoro (TSO), QEP Resources (QEP), and Northern Tier Energy (NTI).
Moves in crude oil and gasoline prices also impact funds such as the ProShares Ultra Oil & Gas (DIG), the PowerShares DB Crude Oil Double Short ETN (DTO), 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).
In the next part of this series, we’ll discuss how the global crude oil supply outage impacts the crude oil market.