Gasoline prices in the US remain on a bearish trend that will likely continue in coming weeks. Since the beginning of September, it has been trading below $2.50 per gallon; a level that had been a steady support level since late January. As the US driving season comes to an end and with the slowing of the global economic growth, demand may falter further.
US gasoline prices have been on a downtrend in recent months; dropping by close to 50% since hitting its all-time high in June. Granted, prior to 31st August, the prices held steady above the critical level of $2.50 as has been the case for about 7 months. The US driving season was one of the bullish drivers that offset the bearish outlook. As the season comes to an end, the rising demand concerns will likely continue to weigh in gasoline prices in the short term.
Even with the decline in gasoline demand, US producers have been forced to overproduce the product. Notably, their focus is not on gasoline but on distillate products like diesel, jet fuel, and heating oil whose inventories are at the lowest level in over a decade. The profit margins of distillate products has been high amid heightened demand from Europe and other parts of the world. The subsequent supply/demand imbalance will continue to weigh on gasoline prices in coming months.
Even with the bearish trend, the benchmark RBOB gasoline futures eased on its decline on Thursday after data released by API showed that inventories dropped by 836,000 barrels for the week that ended on 2nd September. The institute also reported a build in crude oil stockpiles by 3.645 million. The official US government’s inventory report is due for release later on Thursday. Economists expect gasoline stockpiles to have dropped by 1.667 million; a larger draw than the prior week’s 1.172 million barrels.