Easing US Pump Prices Draw More Drivers to the Road, for Now

(Bloomberg) — Bullish gasoline futures could curtail the relief drivers are feeling at the pump — just as Americans are finally hitting the road after an unusually slow summer.

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Gasoline futures in New York shifted into the most bullish structure in nearly five years on Wednesday, threatening to slow a recent decline in pump prices. The move comes after weekly gasoline demand jumped by 8.5% last week, snapping several weeks of below-pandemic-level consumption.

The market’s backwardation — when prompt deliveries are are priced higher than future ones — widened to 27.52 cents a gallon at settlement Wednesday, the most since 2017. While it’s not unusual for the August contract to fetch hefty premiums over the off-peak September contract, the pop in weekly demand could be a driving factor.

Average prices at the pump have fallen for the past 43 days, mirroring similar weakness in oil, the main contributor to gasoline costs. But they’re still 36% higher than at the same time last year, according to AAA data.

In any case, the weekly demand uptick isn’t likely to sustain a significant demand recovery, said Andy Lipow, president of Lipow Oil Associates in Houston. “The combination of higher gasoline, food, utility and rent costs is putting a crimp on household budgets and [gasoline] demand continues to decline compared to previous years,” he said.

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