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How Did Gasoline Production and Demand Affect Crude Oil Prices?

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Gasoline production 

On February 24, 2016, the EIA (U.S. Energy Information Administration) reported that gasoline production rose by 334,000 bpd (barrels per day) to 10 MMbpd (million barrels per day) for the week ending February 19, 2016. Gasoline production rose due to the 12-year low crude oil prices and the higher crack spread. The current weekly gasoline production is 4% more than the gasoline production of 9.7 MMbpd in the same period during 2014.

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Gasoline demand and imports

The US gasoline inventory declined despite the rise in production. Why? The US gasoline inventory fell due to the rise in gasoline demand. Gasoline demand rose by 373,000 bpd to 9.6 MMbpd for the week ending February 19, 2016. The rise in gasoline demand boosted production and gasoline imports. Gasoline imports were at 0.566 MMbpd for the same period. To learn more about the gasoline inventory, read the previous part of this series.

Impact 

The rise in gasoline demand drives gasoline prices. The rise in gasoline prices boosts crude oil prices as gasoline is the refined form of crude oil. Higher crude oil prices benefit oil producers like Energy XXI (EXXI), Stone Energy (SGY), Carrizo Oil and Gas (CRZO), Continental Resources (CLR), Noble Energy (NBL), and Pioneer Natural Resources (PXD). Higher gasoline prices benefit refiners like Tesoro (TSO), Marathon Petroleum (MPC), and Northern Tier Energy (NTI).

Crude oil ETFs 

ETFs and ETNs like the VelocityShares 3x Inverse Crude Oil ETN (DWTI), the First Trust Energy AlphaDEX Fund (FXN), the United States Oil Fund (USO), and the VelocityShares 3x Long Crude Oil ETN (UWTI) are also influenced by the roller-coaster ride in the oil and gas market.

In the next part of this series, we’ll look at the distillate inventory for the week ending February 19, 2016.

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