Gasoline demand in the US appears to be easing; an aspect that has placed crude oil price in the red for the second session in a row. WTI futures- the benchmark for US oil – has dropped below the critical level of $110 per barrel. As at the time of writing, it was at $107.24; down from Wednesday’s intraday high of $114.07. At the same time, Brent futures was at $110.16; down by 4.75%.
Interestingly, concerns over gasoline demand comes less than a month since the US driving season began. As cited by Bloomberg, data released by the US Energy Corp. (NASDAQ:USEG) showed that the 4-week moving average of the supplied gasoline is about 600,000 barrels below the level in a typical driving season.
Notably, this is a key gauge of demand and signals how the soaring prices is discouraging people from the rosdtrips that define the summer period. Indeed, data by the Energy Information Administration (EIA) has further confirmed the situation. On Wednesday, a report by the agency showed that gasoline inventories rose by 2.645 million for the week ending on 24th June. The build is higher than the previous week’s rise of 1.489 million.
Slowed demand growth vs. demand destruction
As at mid-June, gasoline price in the country hit a record high of $5.01 per gallon. While they have since eased, they remain significantly high. As at the time of writing, gasoline futures were at 3.52; down by 5.25%. The market is digesting EIA’s inventory data.
Even so, it is important to note that the slowed growth in gasoline demand is different from demand destruction. While high inflation may lead to a decline in the number of people travelling over the next two months. Even so, this year’s summer period is set to record a significant hike in oil demand after the two years of the coronavirus pandemic.
Besides, tight supplies continue to define the market. For as long as the demand/supply imbalance persists, gasoline price in the US will likely remain on an uptrend in the short term. In particular, gasoline futures will likely continue to trade above the previously evasive zone of $3.50 per gallon.