Gas prices fall as driving season slows
Sliding demand, the return of refinery units from Canada to Texas and the absence of hurricanes in the Atlantic Ocean have helped swell stockpiles to the highest seasonal level in three years and pushed prices down every day this month. Gasoline may drop another 0.5 cent a day in coming weeks, said Michael Green, a spokesman for AAA, the largest U.S. motoring group.
"There remains enough supply for the demand," Green said in a phone interview from Washington. "Summer trips are ending and many people are headed back to school. You will get a little spurt around Labor Day, but not enough to change things."
Gasoline is down about 9 cents this month, compared with a 33-cent jump last August, when the largest refinery in Venezuela was shut after a fire and Hurricane Isaac closed refineries along the Gulf Coast. The Energy Information Administration estimates U.S. demand for the motor fuel may slip this year to the weakest since 2001 as the economy in the U.S., the world's largest oil-consuming nation, struggles to gain momentum.
The average pump price was $3.539 a gallon Wednesday, matching the lowest level in a month, Heathrow, Fla.-based AAA said on its website.
Retail prices have fallen along with gasoline futures, which are down 2 percent in August on the Nymex. West Texas Intermediate crude oil has fallen 0.3 percent from a 16-month high on July 19 on the exchange.
Deliveries to wholesalers in the week ended Aug. 9 contracted 0.6 percent to 9.19 million a day, 1.3 percent below a year earlier, according to the EIA, the Energy Department's statistical arm. Demand typically tapers off after the Labor Day holiday, which falls this year on Sept. 2. In the past five years it has declined an average 4.2 percent during September.
Petroleos Brasileiro SA restarted a fluid catalytic cracker at its Pasadena, Texas, refinery by Aug. 13 after an unplanned shutdown. Irving Oil Corp.'s New Brunswick, Canada, plant was scheduled to restart units, including a catalytic cracker, in the week of Aug. 4 after unplanned work.
"There have been a number of unscheduled outages," Andy Lipow, president of Lipow Oil Associates LLC in Houston, said in a phone interview.
Sluggish demand and refineries that in the middle of July processed the most oil since 2005 boosted inventories to 223.6 million barrels in the week ended Aug. 2, the highest seasonal level in weekly data going back to 1990. Supplies last week declined 1.17 million barrels as unplanned shutdowns reduced production.
"We're at the height of driving season and stocks are plentiful," Stephen Schork, president of the Schork Group Inc., an energy-advisory company in Villanova, Penn., said by phone. "I would expect stable to slightly declining gasoline prices between now and Labor Day."
Last year, pump prices reached $3.829 a gallon on Aug. 30 as Isaac swept across the Gulf of Mexico, forcing the closure of 13 percent of the Gulf Coast's refinery capacity, and Venezuela's 645,000-barrel-a-day Amuay plant shut after a deadly explosion, reducing supplies in Central and South America.
The Atlantic hurricane season is about to enter the most active phase as conditions for the powerful storms improve across the basin. The season begins on June 1 and the busiest period falls between Aug. 20 and October. Sept. 10 is the statistical peak, according to the National Hurricane Center in Miami.
"It's still very early in the month, given the fact that hurricanes often come in August," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "But we're running out of time on the gasoline season. If there is no hurricane and refineries run smoothly, I would expect prices to continue to drop slowly."
The EIA, in its August Short-term Energy Outlook, forecast that demand will fall this year to 8.69 million barrels a day from 8.7 million in 2012. Consumption in 2014 will drop to 8.67 million barrels.
The Federal Reserve said on July 31 that it would maintain its $85 billion monthly bond buying to stimulate growth as long as it saw the economy, including the jobs market, struggling. Fed Chairman Ben Bernanke next month will probably reduce the central bank's $85 billion in monthly bond purchases, according to 65 percent of economists surveyed by Bloomberg.
"The Fed tapering is a sign the economy is getting better but the market is not too sure how the economy is going to survive without that extra push," said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Speculators betting on a late-season rally trimmed bullish bets on gasoline for the first time in five weeks in the seven days ended Aug. 6. Hedge funds reduced net-long positions by 2 percent to 70,346 contracts of futures and options, the Commodity Futures Trading Commission said Aug. 9 in its weekly Commitments of Traders report.
Bullish bets had increased in the prior four weeks to a four-month high on speculation the Obama administration wouldn't act to ease requirements for blending ethanol into gasoline, which refiners said was driving up the price of fuel.
The Environmental Protection Agency said Aug. 6 that it will allow four extra months to meet this year's requirement to blend 13.8 billion gallons of ethanol into gasoline under the 2007 Renewable Fuels Standard and that it may adjust next year's quotas. The cost of Renewable Identification Numbers, or RINs, which track compliance with the law, sank 34 percent this month to 72 cents yesterday, according to data compiled by Bloomberg.
"Refinery outages are easing," said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. "With the RINs situation, sentiment has turned bearish."
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