U.S. gasoline demand rising

The U.S. Energy Information Administration reports U.S. gasoline demand has been gaining strength and estimates summer demand will be about 2% above 1996 levels. EIA predicts a 1.3% year-to-year growth rate for the second quarter and a 2.6% increase for the third quarter. It said stocks have dropped below comparable 1996 levels and are expected to remain relatively low throughout the rest of this year.

Aug. 18, 1997

3 min read

The U.S. Energy Information Administration reports U.S. gasoline demand has been gaining strength and estimates summer demand will be about 2% above 1996 levels.

EIA predicts a 1.3% year-to-year growth rate for the second quarter and a 2.6% increase for the third quarter.

It said stocks have dropped below comparable 1996 levels and are expected to remain relatively low throughout the rest of this year.

Oil prices

It said Organization of Petroleum Exporting Countries production strength, a slight increase in expected oil output from Latin America (namely Colombia), and the prospects for additional excess world oil stocks in the near term are expected to hold prices in check.

EIA said the projection also assumes that Iraq soon will resume exports at a 1.4 million b/d rate. (Iraq announced at midweek last week that it was immediately resuming exports; see Newsletter, this issue.)

Iraq stopped exporting oil in June while negotiating a new plan for distributing humanitarian supplies bought with the oil revenues. The United Nations approved the plan Aug. 4.

EIA said, "Even if Iraq begins exporting in early August, they would have less than 30 days to export as much as possible before the current 90-day window expires on Sept. 5. Most analysts estimate that the most Iraq could export is about 1.4 million b/d."

It said since current supplies are in general balance with demand, such a large volume of additional exports into the world oil market could cause prices to decline $1-2/bbl or more.

"Petroleum product prices are expected to respond to the lower crude oil prices and, despite some bullish-looking spot gasoline prices in recent weeks, EIA has lowered its retail gasoline price projections for the rest of the summer from last month's projections.

"The third quarter average retail gasoline price (all services, all grades) is now expected to be $1.25/gal, 4¢/gal below the second-quarter average and 6¢/gal below the 1996 third quarter average. Current price strength evident in the spot market is expected to be short-lived."

Natural gas

EIA said natural gas storage levels are higher than last year, injections into storage have been strong, and spot prices have remained fairly steady since the beginning of May.

"With slightly higher storage levels than last year's expected at the start of the heating season (Nov. 1), the average wellhead price for next winter is still expected to be more than 30¢/Mcf lower than last winter's price.

"As always, weather is a factor in the forecast.

"Also, early cold weather in October and November could cause an unexpected surge in heating demand, pushing storage down and spot and futures prices up, as happened last year."