US gasoline demand
The EIA (U.S. Energy Information Administration) reported that the four-week average US gasoline demand fell by 6,000 bpd (barrels per day) to 9,770,000 bpd from August 5–12, 2016. However, the US gasoline demand is up by 1.8% YoY (year-over-year).
US gasoline prices hit a low of $1.14 per gallon on February 8, 2016—the lowest in 12 years. On August 23, 2016, prices were up by 31.5% from the lows in February 2016 due to the increase in gasoline demand. Crude oil prices are up by 83% for the same period.
US gasoline demand estimates for 2016 and 2017
The EIA reported that US gasoline demand is expected to increase by 150,000 bpd to record levels of ~9.3 MMbpd in 2016 and 2017. This would be the highest annual average gasoline consumption on record. US gasoline demand rose by 2.7% in 2015 to an average of 9.2 MMbpd.
US highway travel is expected to rise by 2.3% in 2016 compared to 2015 due to lower retail gasoline prices and the strong labor market in 2016. This will lead to a rise in gasoline consumption in 2016. Expectations of a rise in gasoline demand should support gasoline and crude oil prices in 2016.
High gasoline and crude oil prices will have a positive impact on refiners and oil producers’ earnings like Swift Energy (SFY), PDCE Energy (PDCE), Tesoro (TSO), Valero (VLO), and Warren Resources (WRES).
Moves in crude oil and gasoline prices also impact funds such as the VelocityShares 3x Long Crude Oil ETN (UWTI), the United States Gasoline Fund (UGA), the Direxion Daily Energy Bear 3x (ERY), and the PowerShares DWA Energy Momentum ETF (PXI).
For more bullish drivers, read EIA Revises US Crude Oil Production: A Bullish or Bearish Driver? and US Crude Oil Production Rose for the Week Ending August 12.
In the next part of this series, we’ll look at an important driver for crude oil in 2016.