U.S. motorists are taking advantage of cheap gasoline, fueling up and hitting the roads. According to the EIA, gasoline demand is at a record high for this time of year.
The U.S. burned through 9.4 million barrels per day of finished motor gasoline in March, as the economy continues to grow and motorists fill up their tanks with $2 per gallon gasoline. That level of consumption is unusually high for this time of year and about 600,000 barrels per day higher than the same month a year ago. Also, gas demand is up more than 8 percent since January.
Part of the reason is due to an unseasonably warm winter. Part of it is also due to the continuing improvement in the labor markets – the U.S. added more than 200,000 jobs in both February and March. Related:As Net-Long Positions Near Records, Is The Oil Rally Overdone?
But cheap fuel also deserves a lot of credit. The American auto market had a record year in 2015, and sales of light trucks and SUVs led the way.
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The elevated levels of gasoline consumption are good news for oil prices. Although the effect on crude oil is not entirely direct – gasoline only makes up part of a barrel of processed crude – strong demand will pull some of the excess oil out of the market. Related: Is A Gas War Between The U.S. And Canada About To Start?
Another way of analyzing gasoline demand is through storage levels. Energy analysts have closely watched the record levels of oil sitting in storage, but a spike in gasoline inventories has also weighed on oil prices. Gasoline stocks in the U.S. hit a high of 258 million barrels in early February, a time when crude oil prices crashed to $27 per barrel.
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But while oil storage levels continue to climb, strong demand from motorists has eaten into the mountain of gasoline inventories. Gasoline stocks are down to 242 million barrels, which is not too much higher than the 229 million barrels sitting in storage at in late March 2015. Strong gasoline demand bodes well for crude oil prices, as demand continues to soak up supply.
By Charles Kennedy for Oilprice.com
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