Manufacturing Gains Boost Crude, Gasoline Contracts

By Brian L. Milne, Energy Editor, Schneider Electric

GasPumpsLRRBOB gasoline futures trading on the New York Mercantile Exchange moved higher with the West Texas Intermediate crude contract in trading on the first day of December following the Thanksgiving Day weekend, with the upside lent support from an unexpected expansion in manufacturing activity in the U.S. and China during November.

Growth in manufacturing for these two countries, which represent the world’s top two oil consuming nations, suggests ongoing expansion in their economies that bodes well for greater demand for oil. The expansion also offset data showing retail sales after Thanksgiving during Black Friday declined from year prior.

Retail gasoline prices trended lower for much of the fourth quarter, pressed down, in part, by a growing global supply of oil driven in large part by the U.S., where crude production topped 8.0 million bpd in mid-November for the first time since January 1989. Increasing U.S. output has, reports suggest, prompted some oil ministers with the Organization of the Petroleum Exporting Countries (OPEC) to consider a lower production target for the cartel when they meet Dec. 4 to discuss policy. No change to the 30 million barrels per day (bpd) quota is expected, however.

View Schneider Electric’s Weekly and Historical Gasoline Price Index.

U.S. retail gasoline prices were the lowest for the just passed Thanksgiving Day holiday—the busiest travel time of the year for the country—since 2010. The Energy Information Administration’s (EIA) U.S. average price for regular grade gasoline sold at retail outlets across the country averaged $3.293 gallon Nov. 25, down 14 cents from year prior. Yet, the average is on the upturn, having gained 7.4 cents in the week leading up to Nov. 25.

Low gasoline prices are part of their undoing, with implied demand averaging 4.7% higher during the four-week period through Nov. 22 at 9.039 million bpd EIA data shows. Cumulatively in 2013 through Nov. 22, apparent gasoline demand averaged 8.759 million bpd, 1.2% higher year on year.

Wholesale gasoline costs moved mixed during the final week of November.

Beyond the manufacturing data and OPEC meeting, the first week of December offers several reports for the oil market to follow, including a second reading for U.S. third quarter Gross Domestic Product Dec. 5 and the Nonfarm Payroll report for November Dec. 6. The data would provide the latest indications of the veracity of the U.S. economic recovery, and spark renewed speculation on when the Federal Reserve would consider starting to reduce its stimulus efforts. The central banks’ quantitative easing policy has underpinned support for equities and oil.

About the Author
Brian L. Milne is the Energy Editor for Schneider Electric—a leading business-to-business provider of real-time commodity information services among many other activities. Milne has been focused on the energy industry for 17 years as an analyst, journalist and editor. He can be reached at brian.milne@telventdtn.com.

css.php