U.S. average pump price slips to $3.45 on strong refinery runs and rising stocks
June 10, 2024
Key Observations:
With the May-24 U.S. labor reports now in the rear view mirror and release of the May-24 U.S. CPI data lying directly ahead (Jun 12), we revisit the retail gasoline price.
The U.S. average price at the pump for regular grade gasoline now stands at $3.45 per gallon, according to the AAA series. This level marks a slide of 22 cpg (–6%) since May 1.
Though a price slide at this time of year is seasonally normal, the current movement is larger and later than normal. In the context of (a) the headline job losses reported on Friday in the U.S.Household Survey and (b) the more general concerns about the condition of consumer demand amidst current interest rates, one could reasonably ask whether gasoline prices are a canary no longer singing in the coal mine.
For now, the answer is this bird is still chirping. It is higher supply, not lower demand, driving prices on the margin. In prep for the likely active hurricane season, U.S. oil refinery utilization is ratcheted up to 95.4%, or four points above normal. This strong run rate has lifted U.S. gasoline stocks to 231 million barrels (+12mb, or +5.5%, YoY).
These precautionary stocks will likely be needed. Active hurricane seasons typically knock out at least 20%-points of U.S. oil refining capacity, often for extended periods.
Source: AAA, EIA, NOAA, Blacklight Research. Note: U.S. domestic consumption and exports of motor gasoline are solid at 9.07 million b/d and 878 thousand b/d on their four-week moving averages through May 31, respectively. Given these demand profiles, supply is not as abundant as might be implied by the recent hooks in the charts above. Current U.S. motor gasoline stocks provide 23.2 days of demand coverage (domestic plus exports). This is slightly below the fifteen-year average (46th percentile).
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