U.S. gasoline prices started rising again after a brief respite last week, in which oil prices slumped following the OPEC+ decision to add additional crude supply to the market every month starting in August.
In the week to July 26, the national gas price average pushed two cents cheaper to $3.15 per gallon, AAA said on Monday. One of the factors for lower national average gas prices was the fact that U.S. gasoline demand remained relatively flat on the week. The other was the plunge in international crude oil prices on Monday, July 19.
“For pump prices to push less expensive, OPEC will need to follow through with their production increases, crude will need to sell consistently at lower prices and the market will need to adjust to the potential resurgence of COVID cases,” AAA spokesperson Jeanette McGee said. “If these factors prove true consistently, pump prices could be less expensive in August, though the national average could still be at or above the $3 per gallon mark,” McGee added.
U.S. gasoline prices have averaged $3.14 per gallon since the beginning of July, AAA has estimated.
In recent days, however, crude oil prices stabilized following last week’s slump, with Brent Crude back above $75 a barrel and WTI Crude just above $73 early on Thursday.
“After a brief decline in the national average, gas prices are again headed up,” Patrick De Haan, head of petroleum analysis for GasBuddy, tweeted on Thursday. The current average is $3.16 a gallon, up 2 cents from last week and 98 cents a gallon higher than a year ago.
The EIA weekly inventory report showed on Wednesday a draw of 2.3 million barrels in gasoline inventories last week, with production averaging 9.8 million bpd. This compared with a modest stock decline of 100,000 barrels reported for the previous week and average production of 9.1 million bpd, implying that U.S. gasoline demand is holding up despite fears of the Delta variant surging.
The EIA report was constructive, showing that implied gasoline demand edged up by 30,000 bpd, while implied distillate fuel oil demand grew by 431,000 bpd over the week, ING strategists Warren Patterson and Wenyu Yao said today.
One of the biggest market fears now is whether the COVID resurgence would derail the gasoline demand recovery so far this summer.