Crude futures immediately rose when the Energy Information Administration weekly data was released Wednesday morning, but fell back as traders assessed the rising supplies in refined products. West Texas Intermediate oil futures were at $43.95 per barrel, about a 2 percent decline.
"When you look back at how high gasoline inventories remain after what was a record driving season, if crude oil prices come under pressure, gasoline prices will remain with them. I don't know how you could make a case for gasoline prices to rise when inventory levels are where they are," said Gene McGillian, head of market research at Tradition Energy.
Ultra-low sulfur diesel futures for October were at $1.39 per gallon, down about 2.2 percent. The diesel contract represents both diesel and heating oil, used largely in the Northeast. Kilduff said the contract for December was trading at $1.42 per gallon and January was at $1.44 per gallon.
"The October to December spread can be 10 to 15 cents wide," he said, noting the market has low expectations for a price rise for distillates. This time last year, futures were trading at about $1.65 per gallon and ultimately bottomed at about $1 in January. If diesel should undercut last year's levels, it would be the lowest price since 2000.
Gasoline futures "could probably go down another 30 cents. You could see it challenge $1 on the board. You could see some places, like New Jersey, with gasoline down at the pump around $1.50 [per gallon]," he said. RBOB gasoline futures were trading at $1.37 per gallon, off about a half percent.
Oil prices have been fluctuating in the $40s per barrel, and have struggled to regain the $50 level. McGillian said prices will have a hard time rising above $50 with the current glut.
Analysts had expected oil to take another leg down now through October, due to refining maintenance season, but so far refineries continue to run at high levels. In the maintenance season, refiners use less fuel as they switch over to produce winter grade fuels.
"The idea that [oil] is going to crater before the election, I don't know that that's a real strong possibility. It looks like we're getting ready to test that $43 low we made. If we get below that, there's higher odds we could push toward $40," said McGillian.
McGillian said the latest round of headlines form the International Energy Agency and OPEC suggests softer than expected demand, and that's also weighing on the price of crude. "The headlines that seem to be getting the most attention are they're worried about demand growth," he said.
There was some optimism that OPEC and other producers, like Russia, would get together later this month to impose some sort of production freeze at a meeting in Algiers.
"I think there's a realization there doesn't seem to be any change by the Saudis coming, at least that people can bank on," said McGillian. If there was a freeze deal, some producers would be freezing at near record high levels of production, which could mean any deal would have minimal real impact on the market.
As for U.S. prices at the pump, Kloza said another factor could make prices cheaper for consumers.
A new 88 octane gasoline, with 15 percent ethanol, is soon to be released. "It's probably going to be selling 10 cents lower than the traditional fuel in the upper Midwest and from Pennsylvania down through Virginia and the Carolinas, Florida and some of the Gulf coast sates," said Kloza. "… [I]t will be interesting to see if that brings gasoline prices down."
Correction: This story has been updated to reflect that the week earlier's inventory showed a draw, not a build.