November WEX Fuel Index

Gasoline prices were down slightly at the end of November over the previous month, but OPEC’s decision to curb production next year is already starting an upward trajectory in December as markets react.

Starting on January 1st, 2017, OPEC plans to cut oil production by 1.2 million barrels per day. This cut is expected to help balance supply and demand on the global stage. There is some skepticism though that OPEC will be able to comply with the production cuts and if oil prices run too high it could reignite U.S. shale oil production.

Though prices are clearly in rally mode to start the month of December, gasoline inventories appear to be comfortable. According to inventory data from the Energy Information Administration, gasoline storage levels have increased in each of the last three weeks totaling more than 5.1 million barrels.

A price rally is likely to motivate refiners to make more gasoline and that should keep inventories rising through the remainder of the year as demand typically wanes a bit in December.

Wholesale prices have been moving higher to start the month, but in most pockets of the country, prices have only reached levels last seen in the middle of October. As a result, at this point a massive jump in retail gasoline prices in the U.S. is not expected.

Gasoline prices started the month at $2.155 per gallon and are likely to increase over the next couple of weeks as the chance of a sub $2-per-gallon average has essentially disappeared for the remainder of 2016. Additionally, the spread between current prices and 2015 have widened with the current average of $2.162 per gallon, about 12.5 cents per gallon higher than the same time last year.