27 Dec

US Gasoline Demand Could Drive Crude Oil Prices Higher

WRITTEN BY Gordon Kristopher

US gasoline demand 

According to the EIA, the four-week average US gasoline demand fell by 42,000 bpd (barrels per day) or 0.5% to 9 MMbpd (million barrels per day) on December 8–15, 2017. However, demand rose 1.6% or by 142,000 bpd from the same period in 2016.

The year-over-year increase in gasoline demand is bullish for gasoline and oil (USO) (USL) prices. Higher gasoline (UGA) prices benefit US refiners (CRAK) like Phillips 66 (PSX) and Holly Frontier (HFC).

US Gasoline Demand Could Drive Crude Oil Prices Higher

US gasoline demand: Peak and low  

The above chart shows that US gasoline demand and gasoline prices are usually closely related. US gasoline demand tested 9.8 MMbpd in August 2016—the highest level ever. In contrast, US gasoline demand tested 8.2 MMbpd in January 2017—the lowest level since February 2012.

US gasoline consumption estimates  

US gasoline consumption averaged 9.32 MMbpd in 2016—a record high. It’s expected to average 9.32 MMbpd in 2017. The EIA estimates that US gasoline consumption will average 9.34 MMbpd in 2018—the highest level ever. Higher demand benefits gasoline and oil prices. Higher oil (UCO) prices favor oil producers (PXI) (VDE) like Newfield Exploration (NFX), Anadarko Petroleum (APC), and Energen (EGN).

Impact 

The EIA will release the weekly gasoline demand data on December 28, 2017. Any rise in US gasoline demand is bullish for gasoline and crude oil (DWT) (SCO) prices. However, any fall in gasoline demand could pressure gasoline and oil prices.

Next, we’ll discuss some crude oil price forecasts.

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