Oil Traders Split on How Gasoline Demand Will Affect Oil Prices
As heating oil demand falls and gasoline demand rises, what will happen to the price of crude? (image: blog.nj.com and cnn.com)
As the heating season prepares to give way to the driving season, oil traders shift their focus from the market for distillates (including heating oil) to the market for gasoline. More people drive than heat their homes with oil, so crude oil futures tend to rally when gasoline demand picks up, as it usually does in the summer. According to The Globe and Mail of Toronto, traders are making big bets that gasoline prices are going to rise and rise soon. But according to the Wall Street Journal, gasoline inventories are near a 16-year high and refiners aren’t in a hurry to buy up crude before the summer—a sign that they are not worried about rising prices.
Big oil traders, such as the trading firms Vitol and Trafigura or investment banks like Morgan Stanley and J.P. Morgan, aren’t concerned about existing inventories, reports The Globe and Mail. As they see it, low refinery utilization will let increased demand quickly cut into gasoline inventories, shrinking supplies and raising prices.
Afternoon Price Check, March 9: Supply Concerns, Strong Dollar Weigh Down Oil Prices
Crude oil prices over the course of today, March 9. (image: ft.com)
Crude and heating oil prices fell today, though each gained back some ground from earlier losses. A strong dollar drove down demand for oil futures, because those commodities became more expensive for traders holding other currencies. Traders expect this week’s inventory reports to show an increase in supplies of crude, and the price of crude and refined products sank as a result. The API’s inventory data will be released later this afternoon, while the EIA’s figures will be issued Wednesday morning at 10:30 am. Inventory numbers are likely to dominate oil markets tomorrow.
Today’s closing prices on NYMEX
Crude oil (April 2010 contract): Down 0.5 percent, $81.48 per barrel.
Heating oil (April 2010 contract): Down 0.8 percent.
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