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Another problem for oil: Summer gasoline demand disappointed, says analyst

Cohen: See oil prices in the $60 range by next year

Brimming stockpiles of refined petroleum products have raised concerns about near-term demand for crude oil. Now, data suggests gasoline consumption in recent months wasn't as strong as expected, according to Michael Cohen, head of energy commodities research at Barclays.

"Essentially what happened is the expectation for a very strong summer driving season missed the mark," he told CNBC's "Squawk on the Street."

That adds another headwind for crude oil, which fell below $40 this week on concerns that a glut of gasoline and other products would cause refiners to reduce crude runs.

To be sure, the U.S. Energy Information Administration expects average annual U.S. gasoline consumption to rise to the highest level on record in 2016, up 1.5 percent to 9.29 million barrels per day.

But Cohen said Wednesday preliminary indicators ahead of the summer suggested that gasoline demand in the United States would rise 4 to 5 percent from last year.

When final monthly data from EIA came out this week, however, it showed the pace of gains were roughly half those initial projections, he added. The data for June and July suggest that trend will hold, he said.

A man pumps gas into his car at a Chevron gas station in Albuquerque, New Mexico.
Sergio Flores | Bloomberg | Getty Images

The summer has already seen a notable disappointment. Ahead of the Fourth of July weekend, Tom Kloza, global head of energy analysis for Opis, told CNBC gasoline demand per day could top 10 million barrels during the holiday period. But consumption failed to crack that level.

Last week, U.S. consumers used about 9.8 million barrels per day of motor gasoline.

"We've already basically gone through, for the most part, half of the summer, and so now with inventories at these very high levels, we have to see the market adjust," Cohen said.

Barclays believes the renewed oil price slide is temporary and forecasts a drawdown of global inventories perhaps as soon as the fourth quarter, he said. The problem is that inventories are so high, the oversupply will cap the recovery and extend the pain for oil producers, he added.

Crude comeback or collapse?

The pressure on crude futures paused on Wednesday after the EIA reported a larger-than-expected gasoline stockpile draw of 3.3 million barrels. U.S. crude settled up about 3 percent near $41 a barrel after closing below $40 for the first time since April in the previous session.

Kyle Cooper, a consultant with Ion Energy Group, said the move higher on Wednesday is nothing more than a rebound following a sharp decline in prices from 2016 highs above $50 a barrel struck in June.

"The problem is the last five weeks have seen total petroleum inventories rise," he told CNBC's "Power Lunch" on Wednesday.

"That's still showing that the excess supply is still there, that even though a lot of people have an expectation that the oil market is rebalancing, total inventory levels are just not showing that yet," he said.

Given those high stockpiles, oil prices could test $35 a barrel in the coming weeks, Cooper said.