The price of oil is unlikely to catch a break until US gasoline does, so this morning’s price move isn’t good news for crude bulls.
The benchmark US RBOB gasoline contract dropped 1.5 per cent to a two month low of $1.5603 a gallon following yesterday’s large surprise build in inventories of the fuel.
With US gasoline consumption accounting for almost one in every ten barrels of oil consumed globally, it’s not surprising that it’s a market that’s watched closely.
As it stands, US refiners are cranking out the motor fuel at a high rate, with refining runs hitting a record last week, according to the US Energy Information Administration, while initial indications are demand – based on preliminary numbers from the EIA – isn’t yet that hot.
Traders normally bank on US gasoline demand picking up over Easter and into the summer months, with family road-trips and driving several hours to weekend vacations spots as American as apple pie and, well, SUVs.
The drag from gasoline has pulled crude oil lower, with international benchmark Brent down 0.9 per cent at $51.35 a barrel while US benchmark West Texas Intermediate lost 1 per cent to $49.10 a barrel. The drop came despite US crude stocks falling for three straight weeks.
“Since the oil complex topped out a little over two weeks ago it has been driven lower by RBOB which have lost almost 10 per cent since April 10,” said Tamas Varga at oil brokerage PVM. “As a comparison WTI and Brent have fallen less than 8 per cent during the same period.”