January WEX Fuel Index

Retail gasoline prices continue to drop as the national average for February begins at less than $1.80 per gallon. The current price represents the lowest retail prices since January 2009, the height of the Great Recession.

Gasoline inventories are considered to be very comfortable as the most recent EIA data shows the highest US gasoline storage levels on the weekly record books. The builds in gasoline may continue through much of February but storage tanks will need to start drawing down high RVP winter product to turn storage tanks over to store spring and summer spec gasoline.

Refinery maintenance is ramping up but there are still several more weeks before maintenance hits a low watermark. In 2015 that refinery utilization low came in late February, but the 2014 bottom in refining came later in mid-March.

After a brief rally recently in response to chatter in regards to an oil production cut, oil prices have pulled back towards $30 a barrel. Many analysts believe a test of the lows seen earlier in the year in the mid $20’s, should happen before prices start to recover.

Gasoline futures and physical markets are also under intense pressure to begin the month. RBOB futures have dropped below $1 per gallon for the first time since late 2008. Meanwhile, with product backing up, several of the spot markets have seen prices that are well below the futures price. Most notably the Midwest has seen very depressed prices with the Chicago gasoline market well below the 80 cents per gallon mark.

A late January snowstorm that blanketed much of the East Coast has put a short-term damper on gasoline demand. However, the low retail prices are likely to stoke gasoline demand in the coming weeks and months.

Retail gasoline prices are approaching a bottom at $1.78 per gallon with expectations for a few more pennies of declines before the market starts to stabilize and reverse.

Diesel prices are just above $2.00 per gallon nationally, and are likely to see downward pressure thanks to strong inventories and a relatively warm winter in the Northeast.