Why Did US Gasoline Futures Rise Almost 8% in 1 Day?
US gasoline futures
January gasoline futures rose 8% to $1.49 per gallon on November 30, 2016. Prices rose despite the larger-than-expected rise in US gasoline inventories. We’ll look at gasoline inventories in the next part of this series.
Gasoline prices skyrocketed due to the bullish momentum in crude oil prices following OPEC’s (Organization of the Petroleum Exporting Countries) production cut deal. For more information on crude oil prices and OPEC’s deal, read Part 1 of this series.
Interested in UWTIF? Don't miss the next report.
Receive e-mail alerts for new research on UWTIF
Highs and lows
Gasoline active futures contracts hit a low of $1.01 per gallon—the lowest level in 12 years—on February 26, 2016. Gasoline prices fell due to falling crude oil prices and strong gasoline production in 2014 and 2015, as you can see in the above chart. On May 27, 2016, prices hit $1.64 per gallon—the highest level since August 2015.
As of November 30, gasoline active futures rose 48% from their lows in February 2016 due to the increase in gasoline demand. However, gasoline active futures were 9% below their 2016 high. Read Gasoline Demand Impacts Crude Oil and Gasoline Prices to learn more.
Impact on gasoline and crude oil prices
Higher gasoline and crude oil prices could have a positive impact on US refiners and oil producers such as Northern Tier Energy (NTI), Noble Energy (NBL), Chevron (CVX), Phillips 66 (PSX), Tesoro (TSO), Apache (APA), Valero Energy (VLO), Western Refining (WNR), Swift Energy (SFY), and Whiting Petroleum (WLL).
Volatility in crude oil prices also impacts ETFs and ETNs like the VelocityShares 3X Inverse Crude Oil ETN (DWTI), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the United States Gasoline Fund (UGA), the VelocityShares 3x Long Crude Oil ETN (UWTI), the Direxion Daily Energy Bull 3x Shares ETF (ERX), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the Vanguard Energy ETF (VDE).
In the next part of this series, we’ll take a look at gasoline inventories.