June gasoline futures contracts trading on NYMEX (New York Mercantile Exchange) rose by 2% to $1.51 per gallon on Wednesday, April 20, 2016. Gasoline prices moved in the direction of crude oil prices. For more on crude oil prices, read the first part of this series. US gasoline prices are also influenced by the US gasoline inventory. To learn more, read the sixth part of this series. Gasoline prices have risen ~12% since April 6, 2016, due to the expectation of a rise in demand ahead of the summer driving season. High gasoline prices benefit US refiners like Tesoro (TSO) and Phillips 66 (PSX).
Average US retail gasoline price
The EIA (U.S. Energy Information Administration) reported that the average US retail gasoline price rose by 3.4% week-over-week to settle at $2.13 per gallon on April 18, 2016. US retail gasoline prices are ~14% lower than in the corresponding period in 2015. Gasoline prices have fallen due to strong gasoline production in the last two years. Consequently, gasoline prices are near their lowest level in the last 12 years.
EIA’s gasoline price forecast for 2016
The EIA forecasts that US retail gasoline prices, including taxes, will average $1.94 per gallon in 2016 and $2 per gallon in 2017. High gasoline prices will motivate US crude oil refiners to produce more gasoline. Consequently, refinery demand for crude oil will increase and support crude oil prices. High crude oil prices benefit upstream players like Cobalt International Energy (CIE), Swift Energy (SFY), Warren Resources (WRES), Energy XXI (EXXI), and Triangle Petroleum (TPLM).
The rises and falls in crude oil prices affect ETFs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the PowerShares DWA Energy Momentum Portfolio (PXI), the United States Brent Oil Fund (BNO), and the United States 12 Month Oil Fund (USL).