04 September 2009 16:42 [Source: ICIS news]
HOUSTON (ICIS news)--US gasoline supplies are abundant after a lacklustre summer driving season and a gasoline analyst said on Friday that future demand appeared to be stuck on a downward trend.
“Because of the weak jobs numbers going into the Labor Day weekend, the expectations are that demand will not be strong,” said Phil Flynn, senior research analyst at PFGBEST, a brokerage in Chicago.
Typically, the price of gasoline hits a high note during the last few weeks of the summer, from July to the end of August, Flynn said.
“Unless we get a supply shock, such as a hurricane, this summer driving season will go in the books as one of the lightest we’ve seen because of the economy,” Flynn said.
Total domestic gasoline supplies stood at 205.1m bbl during the week ended 28 August, according to US Energy Information Administration (EIA) statistics. Last year at the same time, supplies stood at 197.1m bbl.
“The marketplace is very well supplied,” Flynn added.
Even though gasoline consumption has been down and job losses continue to mount, Americans are still planning getaways.
The US Travel Association reported that 63% of US adults expected to take at least one trip for leisure purposes between August and January 2010, up from 61% who expressed the same intention last year.
“The cost of travel remains at historic lows, giving consumers phenomenal options and the opportunity to stretch their dollars farther,” said Roger Dow, president of the US Travel Association.
Last year, consumers were reeling from the record-high crude oil rates that brought over $4/gal gasoline across the country.
The national average retail price on Friday was down to $2.591/gal, according to the automobile group AAA.
Vehicle efficiency has had a small effect on the drop in gasoline demand, according to refining expert Cal Hodge from A 2nd Opinion.
Hodge said car consumers were steered towards gas sipping vehicles last year when gas prices spiked and the trend has continued with a push from the Obama administration’s fuel efficiency mandate and initiatives like the “cash for clunkers” rebates.
“Americans are indeed driving less, but also a little efficiency is creeping in,” Hodge said.
According to the EIA, cumulative daily demand from the start of 2009 to 28 August has dropped by 0.7% to 9m bbl/day from the same period last year last year.
“Most of that 62,000 bbl/day drop is weaker economy activity with slightly better fuel economy,” Hodge said.
Flynn projects that a firming dollar will bring crude and gasoline prices down even more in the near term. “The dollar has run its course on the downside and this will bring down the cost of crude oil,” Flynn said.
Flynn said this has been the most challenging year that both refiners and consumers have faced due to unfavourable refining margins, significantly reduced demand, especially in diesel and jet fuel, which are key indicators of economic activity and the global recession.
“This is the summer that the oil refiners want to put behind them,” Flynn said.Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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