Gasoline Futures Tumble After Big Inventory Build in US
Gasoline futures tumbled Wednesday after a government report showed an unexpected increase in U.S. stockpiles as refiners churn out more fuel in the face of weak demand.
May reformulated gasoline blendstock settled 7.73 cents, or 2.6%, lower at $2.8651 a gallon. The move wipes out two straight days of higher gasoline prices, and could signal cheaper prices ahead for drivers at the pump.
The decline came after the Energy Information Administration reported gasoline inventories rose 1.7 million barrels last week. Demand for gasoline fell 0.5% during the week, according to the EIA's measure, as the sluggish economy keeps drivers off the road.
Analysts surveyed by Dow Jones Newswires expected stockpiles to fall 1 million barrels.
"The demand number was horrific again," said Kyle Cooper, managing partner at IAF Advisors in Houston. "Demand was flat, and production was up."
Oil futures were mixed. Nymex crude shook off earlier losses to end the day, with the May contract settling 44 cents, or 0.5%, higher at $94.64 a barrel. Brent crude settled 44 cents, or 0.4%, lower at $105.79 a barrel.
The decline in gasoline futures was the petroleum market's most notable move and places front-month gasoline futures within striking distance of a six-week low.
Gasoline futures have fallen sharply from their recent high of $3.2035 a gallon reached March 8. The slide comes as refiners ramp up production of summer-blend gasoline ahead of the summer driving season, even as demand for the fuel in the near term remains weak. The drop also coincides with a decline in crude oil prices, which are the biggest determinant of gasoline prices.
Analysts at Citi Investment Research in part attributed the rise in gasoline stocks to higher imports--a factor they said is "unlikely to last given that European refiners have begun their maintenance season."
Still, the recent drop in gasoline futures is being reflected at the pump. The national average price of gasoline stands at $3.572 a gallon, down from $3.696 a month ago and $3.922 a year ago.
The weak economic recovery and slow pace of hiring in the U.S. and other developed countries have damped gasoline demand. Rising vehicle efficiency also is curbing gasoline needs. In a report Tuesday, the EIA said it expects demand during the peak spring-summer driving season to slip to a 12-year low of 8.877 million barrels a day this year, with fuel-efficiency gains more than offsetting an increase in highway travel.
A gallon of regular gasoline during the driving season is projected to average $3.63, according to the EIA, down 6 cents from a year earlier.
The outlook is little better for crude oil. Both the EIA and the Organization of the Petroleum Exporting Countries cut their forecast for global oil demand growth this week, citing the poor economic outlook for the U.S. and Europe.
May heating oil settled 1.34 cents, or 0.5%, lower at $2.9479 a gallon.
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