NEW YORK - Drivers will have some extra money in their pockets this holiday season as gasoline futures tumbling below $2 a gallon mean lower prices at the pump.
"The drop in futures is eventually going to translate into further declines at the pump," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone yesterday. "There will be a little extra discretionary spending that consumers can use somewhere else this holiday season."
The nation's largest motoring club says retail prices "have a very good chance" of being the lowest for the Nov. 28 Thanksgiving holiday in five years. Motorists are already paying the least since 2010 after crude oil tumbled more than 20 percent in the past four months.
Gasoline futures advanced 4.09 cents, or 2 percent, to settle at $2.0425 a gallon on the New York Mercantile Exchange. Thursday the contract closed at the lowest since September 2010.
The average retail price for regular gasoline fell 0.3 cent to $2.914 a gallon Thursday, the least since December 2010, according to Heathrow, Florida-based AAA.
Based on the drop in the futures market, pump prices might fall to $2.70 or thereabouts, Michael Green, a Washington-based spokesman for AAA, said by telephone. "At this point, the market refuses to stabilize, the price of crude oil continues to fall and refiners are making more gasoline. There's no end in sight."
Almost one-fourth of filling stations in the U.S. are selling gasoline for less than $2.75 a gallon, Green said. Less than 1 percent are under $2.50.
"We're still a long way from getting down to $2," Green said. "But I didn't think it was going below $3, and here we are."
The drop in futures prices accelerated Thursday after a government report showed U.S. gasoline inventories increased last week as refineries boosted operating rates before the Northern Hemisphere winter when heating-fuel demand climbs. Stockpiles rose 1.81 million barrels to 203.6 million in the week ended Nov. 7, the Energy Information Administration said.
Refineries operated at 90.1 percent of their capacity last week, up 1.7 percentage points from the previous week and the highest level since the seven days ended Sept. 19, according to the EIA, the Energy Department's statistical arm. U.S. refiners usually schedule maintenance for September and October as they transition to winter from summer fuels.
"When refineries are running at 90 percent you are going to see gasoline supplies rise," Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said by phone. "They want to make distillate fuel to meet demand both here and in Europe this winter, which means there will be a lot of unwanted barrels of gasoline produced."
A Shell filling station in Spring, Texas, was selling the cheapest gasoline as of 4:46 p.m. New York time yesterday at $2.29 a gallon, Patrick DeHaan, a Chicago-based senior petroleum analyst for GasBuddy Organization Inc., said by email.
"The likelihood of $2 gasoline still is quite some distance away, but the chances of it got a big boost today with oil shedding almost $3 a barrel and RBOB declining 10 cents a gallon," DeHaan said Thursday. "If it were to happen, it won't happen until December, if at all."