US gasoline prices could fall to $3 a gallon on oil selloff, rising
stocks
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[October 06, 2023] By
Laura Sanicola
(Reuters) - U.S. gasoline prices are heading south and may hit $3 a
gallon in many places in coming weeks with crude oil futures down $10 a
barrel over economic fears and eroding demand.
The drop in gasoline prices could benefit consumers and cool inflation.
But it also may be a sign of economic weakness with U.S. government data
showing the four week average of gasoline demand at lowest seasonals in
26 years.
Before this week's drop, gasoline prices had posted a 7.4% jump in the
third quarter, riding increases in crude oil futures after production
cuts from Saudi Arabia, Russia and other OPEC+ members.
U.S. wholesale gasoline prices are tumbling, with percentage drops per
gallon on Wednesday between 6.9% and 10.8%.
A flurry of weak economic data took more wind out of the market. Crude
futures settled an eye-popping $5 a barrel lower on Wednesday, and fell
another $1.66 on Thursday.
The four-week average of motor gasoline product supplied - a proxy for
demand - averaged 8.3 million barrels a day, down 5% from the same
period last year, the U.S. Energy Information Administration said on
Wednesday. [EIA/S]
![](http://archives.lincolndailynews.com/2023/Oct/06/images/ads/current/werth_sda_FHG_2023.png)
Demand data was partially influenced as drivers were deterred by severe
rain and flooding on the U.S. East Coast.
Gasoline stocks built by 6.5 million barrels in the week, well above
analysts' expectations.
"All told, fuel prices may be closer to consumers' pain threshold than
inflation-adjusted prices might suggest," JP Morgan said in a note on
Wednesday, indicating that high prices have led to consumers cutting
back on driving.
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![](../images/100623PIX/busine64.jpg)
A customer refuels their vehicle at a Mobil gas station in Beverly
Boulevard in West Hollywood, California, U.S., March 10, 2022.
REUTERS/Bing Guan/File Photo
![](http://archives.lincolndailynews.com/2015/May/02/images/ads/current/guzzardo_lda022609.png)
The 3-2-1 crack spread, a proxy for refining margins, fell below $20
a barrel for the first time in 18 month on Wednesday, and is down
nearly 40% in the past month.
The gasoline crack was $9.63 a barrel, the lowest pandemic-era
shutdowns of 2020.
Gasoline prices, currently averaging $3.77 a gallon, could end up
near $3 a gallon in regions including the Midwest and East Coast
later this autumn, said Tom Kloza, global head of energy analysis at
the Oil Price Information Service (OPIS).
There were 20 U.S. states with some retailers charging under $3 a
gallon, he said, and he expects half of the U.S. to hit that level
by Oct. 31.
The selloff was unusual considering a ban on diesel exports from
Russia, continuing oil output cuts from OPEC, and heavy seasonal
refinery maintenance curtailing fuel production, Kloza said.
The U.S. ADP National Employment Report on Wednesday showed private
payrolls rising by only 89,000 jobs in September, the smallest count
since January 2021.
Oil sold off on the view that 18 months of interest rate hikes by
global central banks were inflicting economic pain.
"When positioning is stretched it can easily turn into a bloodbath,"
said one crude trader.
(Reporting by Laura Sanicola; Editing by David Gregorio)
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