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US gasoline demand seen sputtering with end of summer

Jeffrey Bair
Bloomberg

As most Americans are forced to remain at home moving into fall, this summer’s steady rebound in gasoline demand has stalled out with the end of the driving season.

Road trips have tapered off and the number of students and workers commuting on a daily basis is a fraction of what it normally is as the Covid-19 pandemic continues to ricochet around the country, forcing people to stay at home.

For an oil industry already hobbled by an unprecedented demand collapse, the plateau is ominous moving into the time of year when gasoline consumption is typically at its lowest. The four-week average for gasoline demand reflected by product supplied last week was 8.7 million barrels a day, Energy Information Administration data showed. Compared with this time last year, it’s as if a million full-sized pick up trucks disappeared off the road.

This summer’s steady rebound in gasoline demand has stalled out with the end of the driving season.

“The demand recovery has stalled, and we are looking like we are about 8-10% below where we were at this time last year,” said Houston oil consultant Andy Lipow.

Labor Day offered little to brighten the spirits of fuel sellers. Demand was essentially flat for a holiday that typically sees pumps humming. Last year the week after the holiday brought a boost in demand of 400,000 barrels a day; this year the rise was just 88,000 barrels a day. The Department of Transportation said vehicle miles traveled were down 4.5% in the week ending Sept. 13, including the Monday holiday, from the previous seven days.

Much of that demand is typically driven by families returning to work and school. This year though, many students are stuck at home and may be until a vaccine makes it safe for them to return.

As of Sept. 2, 73% of the nation’s 100 largest districts were requiring remote learning, according to Education Week. It said Los Angeles, Chicago and Houston had students at home, with New York offering a combination of traditional attendance and remote classes.

The potential for a coronavirus vaccine looms as something that could kick-start oil markets, said Bob Yawger, head of the futures division at Mizuho Securities. Until then, the oil industry faces a rough fall season and declining margins for both gasoline and diesel.

“Demand is obviously the biggest problem right now,” Yawger said. “If there were to be a vaccine announced, you would see a spending spree. But right now, I don’t see a lot out there that is good.”