Continual growth in the number of U.S. oil rigs and the increased drilling it implies are raising expectations for a climb in domestic oil production. Additionally, increased U.S. crude oil production coupled with lower driving demand has kept downward pressure on the national average price at the pump, which has fallen for 21 consecutive days. Today’s national average price for regular unleaded gasoline is $2.27 per gallon, down four cents versus one week ago, five cents less than one month ago, but 47 cents more per gallon year-over-year.
The nation’s top five most expensive markets are: Hawaii ($3.07), California ($2.80), Alaska ($2.74), Washington ($2.73) and Pennsylvania ($2.57).
The top five markets with the most dramatic monthly decreases in gas prices include: Ohio (-33 cents), Indiana (-31 cents), Michigan (-18 cents), Illinois (-18 cents) and Kentucky (-17 cents).
Gas prices on the West Coast continue to be the highest in the country, with every state in the region landing on the top ten list of most expensive markets: Hawaii ($3.07), California ($2.80), Alaska ($2.74), Washington ($2.73), Oregon ($2.52) and Nevada ($2.47). Prices have been relatively steady over the past week despite reports of growing gasoline production and supply in the California market. The California Energy Commission (CEC) reports that California reformulated gasoline inventories increased by 227,000 bbl to reach a total of 6.637 million bbl for the week ending January 20. According to CEC, California refiners increased production of the state’s boutique CARB RFG grade gasoline for use out-of-state. There is also growing demand for non-California reformulated gasoline resulting from increased exports to Mexico and typical demand in Nevada and Arizona.
Pump prices in the Rocky Mountains have remained steady, moving +/- 2 cents or less in most of the region. Prices are expected to follow the national average decrease this week due to suppliers in most parts of the region dropping prices to help move product. These discounts are most prevalent in Wyoming, where commercial and consumer demand typically drop significantly in midwinter.
Great Lakes and Central States
Pump prices in the Great Lakes region continue to drop this week with five states landing on the list of largest weekly declines: Ohio (-11 cents), Michigan (-9 cents), Illinois (-9 cents), Indiana (-8 cents) and Wisconsin (-4 cents). Like suppliers in the Rockies, those in the Great Lakes and Central region are offering steep discounts to help clear out product. Low demand and healthy supply in the Great Lakes region should continue to pressure prices down over the next week.
Prices for drivers in the Central part of the country remain flat despite the shutdown of the Magellan Pipeline last Wednesday. A leak was discovered on a section of the pipeline in Worth County, Iowa. OPIS reports that Magellan resumed operations on the pipeline between Rosemount, Minnesota, and Mason City, Iowa, on Saturday after “repairs to the damaged section of pipeline were safely completed.” This week Missouri ($2.10) and Oklahoma ($2.11) both appear on the top 10 list of least expensive markets.
Mid-Atlantic and Northeast
Prices in the Mid-Atlantic and Northeast followed the national average down this week. Wells Fargo attributes the region’s significantly low demand over the past month to higher than normal rainfall levels, which kept drivers off the road. This includes some of the most densely populated areas along the East Coast. The latest U.S. Energy Information Administration report shows that regional gasoline supply increased by 0.9 million bbl last week, to a total of 71.6 million bbl.
Barring any unexpected impact to production or distribution, prices in the region should continue to drop this week due to low demand and healthy supply. Despite recent drops, Pennsylvania ($2.57), Washington D.C. ($2.52), New York ($2.50) and Connecticut ($2.44) all landed on the list of most expensive markets for the week.
South and Southeast
Pump prices continue to move down in the South and Southeast, with the regions featuring five of the ten cheapest states in the nation: South Carolina ($2.04), Alabama ($2.07), Mississippi ($2.08), Texas ($2.10) and Arkansas ($2.11). The Gulf Coast is home to the bulk of U.S. refining capacity, which helps to keep prices low. Ample supply tied to low demand should keep regional prices down until the seasonal switch to the production of more costly summer-blend gasoline this spring.
Oil Market Dynamics
Markets opened Monday morning posting steady crude oil prices as a result of increased U.S. oil production. Oil-services firm Baker Hughes reported that drillers added 15 rigs in the U.S., bringing the total crude oil rig count to 556, the highest since November 2015. The increased U.S. production continues to offset OPEC’s efforts to rebalance the global oil market. End of month surveys of OPEC production cuts are expected tomorrow and traders will be paying close attention to the cartel’s agreement compliance. Market watchers will also keep a close eye on U.S. production and the impact it has on supply and demand. At the closing of Friday’s formal trading session on the NYMEX, WTI was down 61 cents to settle at $53.17 per barrel.
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