Increased gasoline inventories push U.S. retail prices lower

Feb. 3 (UPI) -- U.S. consumers are seeing a hint of relief at the pump after a steady string of gains, supported in part by an increase in available supplies, data show.

Travel club AAA reported a national average retail price of $3.49 for a gallon of regular unleaded gasoline on Friday, down a penny from week-ago levels. While not much of a decline, retail prices have been stuck near $3.50 for weeks.

AAA pointed to data from the U.S. Energy Information Administration, the statistical arm of the Energy Department, showing a 2.6 million barrel increase in domestic gasoline inventories to 234.6 million barrels.

"Despite rising gas demand and recently elevated oil prices, the growth in total supply has helped to limit pump price increases," it said. "If demand does not spike, drivers could continue to see pump prices drift lower through the weekend."

EIA data also showed that gasoline production increased to 9.4 million barrels last week. The total amount of refined petroleum products supplied to the market, a data point that analysts use as a proxy for demand, was 19.4 million barrels per day, compared to the 19.9 million bpd from the similar week in 2020, to discount the strains of the pandemic.

Those data points should support AAA's sentiment that retail-level gasoline prices could tick lower over the coming days. Any relief, however, could be temporary given the state of the U.S. refinery sector.

EIA data show the nation's refineries were operating at about 86% of peak capacity last week, compared with levels closer to 90% during the latter part of December, when gasoline prices were closer to $3 per gallon.

Inclement weather in December and recent storm activity in the U.S. south, home to many of the nation's refineries, have curbed activity. Looking ahead, refineries will soon enter a period of seasonal maintenance and then will start making the summer blend of gasoline, which is more expensive because of the additional steps needed to keep it from evaporating during warmer months.

It's possible the national average will hit $4 per gallon by the summer, but it's highly unlikely that prices will hit $5 per gallon like they did last year, barring any black swan event. The federal government is forecasting a full-year average of $3.32 per gallon.