Why Are Traders Tracking Gasoline Demand?

US gasoline demand 

The EIA (U.S. Energy Information Administration) estimated that four-week average US gasoline demand fell by 39,000 bpd (barrels per day) to 8,222,000 bpd from January 20–27, 2017. US gasoline demand fell 0.5% week-over-week and 6% year-over-year. The fall in gasoline demand is bearish for gasoline and crude oil (USO) (IXC) (IEZ) (RYE) (BNO) prices. For more on crude oil prices, read Part 1 of this series.

Why Are Traders Tracking Gasoline Demand?

Lower gasoline and crude oil (VDE) (SCO) (DIG) (XOP) prices have a negative impact on refiners and oil producers’ earnings like Tesoro (TSO), Hess (HES), Valero (VLO), Phillips 66 (PSX), PDC Energy (PDCE), and Northern Tier Energy (NTI).

US monthly gasoline consumption hit a record in September 2016. For more on its drivers, read September US Gasoline Consumption Hits Record for This Time of Year. For updates on gasoline inventories, read the previous part of the series.

Gasoline prices 

US gasoline prices hit $1.14 per gallon on February 8, 2016—the lowest price in 12 years. As of February 7, 2017, prices have risen 30% from their lows in February 2016 due to the increase in gasoline demand. Rising gasoline demand partially supported crude oil prices as well. Crude oil prices rose ~103% during the same period.

US gasoline consumption estimates for 2017 

The EIA (U.S. Energy Information Administration) released its monthly Short-Term Energy Outlook report on February 7, 2017. The EIA estimates that US gasoline consumption will average 9,290,000 bpd and 9,360,000 bpd in 2017 and 2018, respectively. US gasoline consumption figures for 2018 will be the highest ever. US gasoline consumption averaged 9,290,000 bpd and 9,180,000 bpd in 2016 and 2015, respectively.

The EIA lowered its revisions for US gasoline consumption 0.4% and 0.5% in 2017 and 2018, respectively. The revisions will likely have a negative impact on gasoline and crude oil prices.

In the next part of this series, we’ll discuss how China’s crude oil imports and demand impact crude oil prices.