We are now in the shoulder season of demand for refined products including of course gasoline. This means that demand is normally low for gasoline at this time of year as the gasoline driving season is over while demand for diesel and heating oil normally increases as the temperatures decrease which is some time away right now.
These are not normal times!
Demand for gasoline and diesel has been victimized by the pandemic so prices have remained stable even Category 4 hurricane Laura didn’t budge the pump prices for any more than a day.
There is little to no reason for prices at the pump to increase until such time as consumers get back on the road to the office.
The refining industry in reaction to the low demand atmosphere may well extend the fall maintenance program to allow inventories to fall and restore their margins or crack spreads.
Normally (there’s that word again) analysts and traders watch the weekly U.S. EIA inventory reports and adjust the cash futures prices accordingly, which then are reflected at the pump.
I believe that if this is still the case then in my view they are chasing their tails.
The product whose supply demand should be monitored for signs of a dehibernation of the economy, increased demand and higher prices is jet fuel not gasoline or diesel.
This is because gasoline and diesel prices are seasonally cyclical while jet fuel is a year round constant, again in normal times. Jet fuel is used for the business travellers when they are in business and the the consumer for holiday travel assuming they are employed. Jet fuel is also a key element of air cargo deliveries another indicator of a recovering economy. At this point in time jet fuel demand in the U.S. is down 47% versus the 5 year average. Until such time as we see this number move radically and consistently in the opposite direction then gasoline pump prices will remain in snooze control.
Click here to see the interview on BNN Bloomberg.