Gasoline futures log lowest settlement in 11 years

Gasoline leads the losses in the energy market on Thursday, with futures prices dropping by more than 19% to their lowest settlement in more than 11 years.

The April contract for reformulated gasoline futures fell 21.28 cents, or 19.2%, to settle at 89.75 cents a gallon. That was the lowest finish for a front-month contract since Dec. 30, 2008, and the biggest one-day percentage loss for a most-active contract since Sept. 2, 2003, according to Dow Jones Market Data.

The losses followed President Donald Trump's address to the nation late Wednesday, during which he announced restrictions on travel between Europe and the U.S. for 30 days. The announcement fed concerns over the global economy and demand for energy, sending U.S. benchmark crude-oil futures down by more than 4% Thursday.

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"The intensity of the sell-off in anything energy-related, particularly when it comes to consumption, was severe this week and there is anecdotal evidence that some individual metropolitan markets observed demand destruction in double-digit percentages," said a client note by Tom Kloza, global head of energy analysis at the Oil Price Information Service, and Justin Schneewind, markets editor at IHS Markit.

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Gasoline demand in April 2019 was 9.356 million barrels a day, which was the highest level ever recorded for that calendar month, the note said. A 15% demand hit would equate to April 2020 averaging 7.953 million barrels a day, representing "only the second time in the century" where demand has slipped below 8 million barrels a day.

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"I've said that this is a three-headed monster" that started with an economic slowdown and various downgrades of oil demand growth," Kloza wrote in comments to MarketWatch.

"The next phase was unprecedented overseas demand destruction...and now we have the economic hit that comes with most asset classes in freefall and panic from U.S. consumers and the prospects of social distancing," he said.

At the retail level, regular unleaded gasoline prices averaged $2.284 a gallon Thursday afternoon, according to data from fuel-price tracker GasBuddy. Prices are down 2.7 cents a gallon from Wednesday.

As for where retail prices are headed, Kloza said that the rule of thumb for most markets is to take the wholesale price and add 60 cents a gallon "for a likely competitive retail price."

That means that in some sections of the country, "we are now looking at the prospects of some pump prices below $1.50" a gallon, said Kloza.