{"id":69123,"date":"2023-10-05T15:29:17","date_gmt":"2023-10-05T19:29:17","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/demand-destruction-sinks-oil-prices-as-gasoline-inventories-send-warning-signal\/"},"modified":"2023-10-05T15:29:19","modified_gmt":"2023-10-05T19:29:19","slug":"demand-destruction-sinks-oil-prices-as-gasoline-inventories-send-warning-signal","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=69123","title":{"rendered":"Demand destruction sinks oil prices as gasoline inventories send warning signal"},"content":{"rendered":"
\n

The more than 6 million-barrel weekly rise in U.S. gasoline supplies reported by the Energy Information Administration wasn\u2019t just a surprise, but the strongest sign yet that prices for oil and its products have reached the breaking point for consumers. <\/p>\n

\u201cHistorically, high gasoline prices weigh on driving demand,\u201d said Brian Milne, product manager, editor, and analyst at DTN. \u201cSeasonally, gasoline demand falls off in September following the summer months.\u201d<\/p>\n

\n

The average price for a gallon of regular gasoline, however, climbed to $3.857 on Sept. 16, the highest since Oct. 18, 2022, according to data from GasBuddy, so the high so far for this year came just as the summer driving season came to a close. <\/p>\n

On Thursday afternoon, the average price stood at $3.725 a gallon, down 9.1 cents from a week ago. <\/p>\n

It\u2019s no coincidence that the climb in gasoline prices in September came as U.S. benchmark prices for oil topped $90 a barrel. <\/p>\n

Front-month West Texas Intermediate crude futures
\n CL.1,
\n -2.23%<\/bg-quote>
\n settled at $93.68 a barrel on the New York Mercantile Exchange on Sept. 27, the highest since Aug. 29, 2022, according to Dow Jones Market Data.<\/p>\n

Oil prices have fallen back since then. On Thursday, November WTI crude
\n CLX23,
\n -2.23%<\/bg-quote>
\n settled at $82.31.<\/p>\n

Around mid-September, Troy Vincent, senior market analyst at DTN, had told MarketWatch that a test of key technical resistance level at $98 for Brent, and fundamental data beginning to show high prices weighing on demand, looked set to converge. <\/p>\n

\u201cIndeed, we got this perfect convergence of bearish technical pricing developments and fundamental data that have now pushed crude futures below their 50-day moving averages,\u201d Vincent said. \u201cDemand weakness, particularly for gasoline, has been exacerbated by higher prices as we had expected.\u201d<\/p>\n

The EIA on Wednesday reported an unexpected 6.5 million-barrel rise in gasoline supplies for the week ended Sept. 29. That came on the back of data from the government agency showing that motor gasoline product supplied, which is a proxy for demand, averaged 8.3 million barrels a day over the last four-week period, down 5% from the same period last year.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

The steep decline in gasoline demand in September was \u201ca far greater falloff in consumption patterns than we typically have experienced,\u201d said Milne. <\/p>\n

Part of the reason for this includes high retail gasoline prices and persistent inflation, he said. \u201cClimbing interest rates will also slow discretionary spending by consumers, which has closely correlated with driving activity.\u201d<\/p>\n

And there are \u201cstructural changes\u201d to the fuel market to consider as well, said Milne. \u201cEvery quarter there are more electric vehicles displacing gasoline demand, while gas-powered vehicles are increasingly more efficient, capturing greater travel miles with less fuel.\u201d<\/p>\n

The EIA\u2019s U.S. gasoline demand proxy figures show that demand is 10.4% below 2019 levels, 5% below year-ago levels for the seasonal period, and even 3% below 2020 levels, according to Vincent. \u201cGasoline prices have peaked for the year\u201d and gasoline crack spreads \u2014 the difference between the price of oil and the selling price of product \u2014 have plummeted to late 2020 levels. <\/p>\n

The sharp turn lower in gasoline crack spreads, as well as diesel crack spreads this week, even as crude prices have tumbled lower, show that the oil production cuts by OPEC+, which is comprised of members of the Organization of the Petroleum Exporting Countries and their allies, have \u201cpushed the market to its limits,\u201d said Vincent.<\/p>\n

\u201cOPEC-induced or managed market tightness is simply not the same as organic tightness, given that the tightness was created by growing spare [production] capacity,\u201d he said. <\/p>\n

\u201cBy artificially tightening the market so severely and then extending those cuts, OPEC was ultimately always going to test the willingness of refined product consumers,\u201d Vincent said. \u201cThe market is now seeing that there\u2019s little appetite to push crude prices well over $100 while inflation lingers, the U.S. dollar pushes to new highs for the year, and interest rates are set to remain high.\u201d<\/p>\n

<\/p>\n

<\/p>\n

\n

\n \u201c<\/span>\u201cThe pronounced weakness in demand relative to history is unlikely to turn around sharply anytime soon.\u201d \u201d<\/span>\n <\/p>\n


\n \u2014 Troy Vincent, DTN<\/span>
\n <\/small><\/p><\/div>\n<\/p><\/div>\n

Gasoline demand should see a modest rise in the very near term amid the holiday break in the fall, and lower retail prices will inevitably lead to higher consumption later this year, he said. <\/p>\n

However, \u201cthe pronounced weakness in demand relative to history is unlikely to turn around sharply anytime soon,\u201d Vincent said. <\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The more than 6 million-barrel weekly rise in U.S. gasoline supplies reported by the Energy Information Administration wasn\u2019t just a surprise, but the strongest sign yet that prices for oil and its products have reached the breaking point for consumers. \u201cHistorically, high gasoline prices weigh on driving demand,\u201d said Brian Milne, product manager, editor, and […]<\/p>\n","protected":false},"author":1,"featured_media":69124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-69123","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nDemand destruction sinks oil prices as gasoline inventories send warning signal | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The more than 6 million-barrel weekly rise in U.S. gasoline supplies 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