BLOOMBERG

 

Gasoline at U.S. Pumps Set to Hit Six-Year Seasonal High

 

By Lynn Doan and Moming Zhou Jun 17, 2014 1:45 PM ET


Gasoline in the U.S. climbed this week, boosted by a surge in oil, and is expected to reach the highest
level for this time of year since 2008.


The pump price averaged $3.686 a gallon yesterday, up 1.2 cents from a week earlier, data posted on
the Energy Information Administration’s website late yesterday show. Oil, which accounts for two-thirds
of the retail price of gasoline, gained $2.49 a barrel on the New York Mercantile Exchange in the same
period and $4.88 in the month ended yesterday.


The jump in crude, driven by concern that the crisis in Iraq will disrupt supplies, may boost pump prices
by 10 cents a gallon at a time when they normally drop, according to forecasts including one from the
EIA.


“If things deteriorate even more, the spike could be even bigger than that,” Phil Flynn, a senior market
analyst at Price Futures Group in Chicago, said by telephone. “If it weren’t for the situation in Iraq,
gasoline would be coming down by now. This will probably keep it elevated all summer. It’s really
disappointing.”


Iraq’s sectarian violence showed no sign of abating, with Sunni Muslim militants and government forces
fighting to control Tal Afar, in the country’s northwest. Prime Minister Nouri al-Maliki, a Shiite, is trying
to reverse the advance of militants who captured Iraqi’s largest northern city of Mosul and other towns
last week.


Iraq Output
Iraq produced 3.3 million barrels a day of crude last month, trailing only Saudi Arabia among members
of the Organization of Petroleum Exporting Countries, data compiled by Bloomberg show. The Persian
Gulf country is forecast to provide 60 percent of OPEC’s growth for the rest of this decade, the
International Energy Agency said June 13.


The fighting hasn’t spread to the south, which the EIA says is home to three-quarters of Iraq’s crude
output. The country’s 2.58 million barrels a day of exports in May were all from the south, Asim Jihad,
an oil ministry spokesman, said June 1.


While gasoline prices will remain seasonably high through the summer, a more “stabilized” situation in
Iraq would slow the gain at pumps, Michael Green, a spokesman for Heathrow, Florida-based AAA, said
by telephone from Washington.


“We’d expect a slow rise in gas prices over the next few days, but we’re not expecting anything dramatic
unless the situation further deteriorates in Iraq,” Green said.


Watching Crude
Pump prices are 6 cents higher than year-earlier levels, EIA data show. Should gasoline remain above
$3.652 a gallon next week, it’ll be at the highest seasonal price since 2008.


West Texas Intermediate crude, the U.S. benchmark grade, slipped 59 cents, or 0.6 percent, to $106.31
a barrel on Nymex at 1:37 p.m. New York time. Gasoline futures for July delivery gained 1.22 cents, or
0.4 percent, to $3.084 a gallon.


The EIA, the Energy Department’s statistical arm, projected in a report June 10 that retail gasoline would
average $3.66 a gallon in June. The price depends largely on events in Iraq, Sean Hill, a petroleum
economist with the agency in Washington, said by telephone yesterday.


“As things stand right now, you’re looking at probably somewhere around a 5- to 10-cent jump,” he said.


The pump price rose in every region of the U.S. this week, with the biggest gain seen in the Rocky
Mountains region, where it increased 2.3 cents to $3.53 a gallon, the EIA said. Both Phillips 66 (PSX) and
Exxon Mobil Corp. (XOM) reported fires at their refineries in the Billings, Montana, area last week.


The EIA collects information from about 800 filling stations as of 8 a.m. local time on Mondays.


To contact the reporters on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net; Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Richard Stubbe


FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE
FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT
NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE
CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS
CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE
ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.