Gasoline Heading Toward $3?
Today’s Spotlight Market? -? Gasoline prices continue their summer decline, riding the Crude Oil market lower.? Oil prices account for 66 % of the cost of gasoline.? Crude Oil has declined amid fears that China, the world?s second largest consumer, will experience an economic slowdown.? A statement from Chinese Finance Minister Lou Jiwei indicates the Chinese economy will experience economic headwinds.? Even with a recovery in the US, a slower China could put a severe damper on Crude Oil demand.? International Crude Oil prices have fallen by 16% since the end of June.? Domestically, the price decline has been 11%.
Fundamentals? – ? In addition to the worries over Chinese demand, Libya is expecting to resume Crude Oil production.? The Libyan situation seems to change every other week, so this may be taken with a grain of salt.? Refiners are getting ready to switch over to the winter blend of gasoline, instead of the summer blend.? Winter blend is cheaper to produce, but also commands a lower price at the pump.? This time of year tends to bring cheaper gas prices along with it.? Over the past three years, the national average price has fallen by more than 30 cents from September to November.? Traders may want to keep an eye on this week?s EIA inventory report, which could show a sizable drawdown in inventory levels of gasoline, which may give a temporary reprieve for RBOB prices.? The EIA did raise its forecast for US gasoline consumption for 2014 to more than 2 billion gallons.
Technical Notes – View Today’s Chart? -? Turning to the chart, we see the November RBOB contract giving back some of Friday?s gains.? The October contract could catch a bit of momentum if it can confirm a bottoming formation on the daily chart.? Prices are near the 50-day moving average.? If prices are able to hold gains above the moving average, the market could get a boost over the intermediate term.? Failure to push through these prices levels could result in RBOB prices continuing to grind lower.
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