US gasoline prices set to lose steam ahead of summer driving season

By Shariq Khan

NEW YORK, April 24 (Reuters) - A spring surge in U.S. gasoline prices is set to fizzle out earlier than expected as geopolitical concerns abate, raising optimism that motorists will find some relief at the pump ahead of peak summer travel demand.

U.S. gasoline prices are under a microscope ahead of the country's presidential elections in November, with stickiness in inflation among top issues plaguing consumers and policymakers.

After Russia's invasion of Ukraine led to record-breaking prices at the pumps in summer 2022, worsening tensions in the Middle East and Ukrainian drone strikes on Russian refineries had some analysts fearing a repeat this year.

However, signs of de-escalation between Israel and Iran, and Russia's ability to rapidly repair damaged refineries have helped ease some concerns around oil and fuel supplies. U.S. refiners are also returning from annual spring maintenance and ramping up utilization rates, boosting fuel output.

The national average price for a gallon of gasoline stood at $3.66 on Tuesday, 4% higher than last month but about the same as this time last year, according to data from motorist group AAA.

In March, at the peak of disruptions to Russian refining, JP Morgan analysts had said that U.S. gasoline prices were likely to cross $4 a gallon by May.

But Patrick De Haan, analyst at price tracker GasBuddy.com posted on social network X on Tuesday that prices are likely to 'gently fall' in the weeks ahead of the Memorial Day holiday on May 29, considered the start to the peak summer driving season.

Financial investors also cut their exposure to gasoline and most other petroleum contracts last week, highlighting doubts about the sustainability of higher energy prices. Hedge funds and other money managers sold an equivalent of 5 million barrels of U.S. gasoline futures and options over the seven days ending April 16.

"Money managers were reducing their bets on higher energy prices last week, in what appears to be an unwind of the positions added the prior week when it seemed like we might have an all-out war between Israel and Iran," traders at wholesale fuel supplier TACenergy wrote this week.

U.S. gasoline stocks fell last week to 226.7 million barrels, the lowest since December. Product supplied, a measure of demand, also fell to 8.4 million barrels a day, from 8.7 million a week ago, data from the U.S. Energy Information Administration showed on Wednesday. (Reporting by Shariq Khan in New York; Editing by Liz Hampton and Michael Erman)