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US Gasoline Demand: Bright Spot for Crude Oil Prices

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US gasoline demand 

The EIA (U.S. Energy Information Administration) estimated that four-week average US gasoline demand rose by 82,000 bpd (barrels per day) to 8,763,000 bpd between February 24, 2017, and March 3, 2017. US gasoline demand rose 1% week-over-week, but fell 6.1% year-over-year. US gasoline demand rose for the fifth time in the last six weeks. The rise in gasoline demand is bullish for gasoline and crude oil (DIG) (VDE) (FENY) (PXI) prices. For more on crude oil prices, read Part 1 of this series.

Higher gasoline and crude oil (ERY) (ERX) (IEZ) prices have a positive impact on refiners and oil producers’ earnings like Bonanza Creek Energy (BCEI), Phillips 66 (PSX), Valero (VLO), Northern Tier Energy (NTI), and Warren Resources (WRES).

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Gasoline prices 

US gasoline prices hit $1.14 per gallon on March 15, 2016—the lowest price in 12 years. As of March 14, 2017, prices have risen 38.6% 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 have risen ~85.5% during the same period. Changes in gasoline demand drive gasoline inventories. For updates on gasoline inventories, read the previous part of the series.

US gasoline consumption estimates for 2017 

The EIA estimates that US gasoline consumption will average 9,290,000 bpd and 9,390,000 bpd in 2017 and 2018, respectively. US gasoline consumption figures for 2018 will be the highest ever.

US gasoline consumption averaged 9,330,000 bpd and 9,180,000 bpd in 2016 and 2015, respectively. US gasoline consumption hit a record in 2016. Consumption rose due to lower gasoline prices in 2016, consumers buying larger vehicles, improving US economic growth outlook, and drivers traveling more miles.

High gasoline consumption over the long term should have a positive impact on gasoline and crude oil prices.

In the next part of this series, we’ll discuss how Saudi Arabia’s crude oil production impacts crude oil prices.

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