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U.S. gasoline futures slumped this week to the lowest level since 2021, suggesting that the average American pump price will continue to drop and end the year below $3 per gallon.
On Thursday, the NYMEX RBOB gasoline futures contract dropped below the $2 per gallon mark, as demand is weakening and supply is building. The benchmark gasoline futures fell to below $2 a gallon for the first time since 2021.
The latest inventory report from the EIA showed an inventory build of 5.4 million barrels of gasoline for last week. This compared with a build of 1.8 million barrels for the previous week.
At the same time, U.S. gasoline demand between Sunday and Wednesday was 5.7% below the same period last week, according to GasBuddy data reported by its head of petroleum analysis Patrick De Haan.
The drop in the NYMEX RBOB gasoline futures “signals a strong possibility” that the national average U.S. gasoline price will fall to $2.99 per gallon by Christmas if it can remain at or below that level, De Haan said.
The gasoline futures do not indicate the price stations pay and exclude all taxes and transportation as well as overhead.
“But it’s a sign of what’s to come at the pump,” he added.
The recent drop in crude oil prices is also helping ease U.S. gasoline prices.
“If oil prices remain low, drivers can expect pump prices to do the same during the holiday season,” AAA said on Thursday.
“Historically, crude oil tends to drop nearly 30 percent from late September into early winter with gasoline prices trailing the play,” AAA spokesperson Andrew Gross said.
“More than half of all US fuel locations have gasoline below $3 per gallon. By the end of the year, the national average may dip that low as well.”
The average U.S. gasoline price is now at its lowest this year and is set to fall further, which could boost consumer sentiment and also ease inflation.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com