Gasoline ETF Is Down for Now | ETF Trends

Gasoline prices and related exchange traded funds have been declining after hitting a record high last month, but the pullback may be only temporary.

The United States Gasoline Fund (UGA) decreased about 19% since its high in early June.

Meanwhile, Nymex RBOB gasoline futures were hovering around $3.443 per gallon.

While gasoline prices have fallen off from their records, some market observers argued that prices could still rebound if demand from summer driving rises or supplies remain constrained, the Wall Street Journal reported.

The average price for a gallon of unleaded gas was $4.72 Friday, compared to a high of about $5.02 on June 14, according to OPIS data.

AAA attributed the falling gasoline prices to lower demand at the gas pumps. Meanwhile, an increased supply of gas and lower oil prices have also added to the recent price drop. Crude oil futures have even dipped below $100 per barrel.

Gas prices may continue to dip if the current trends hold, according to a AAA report. However, “July is typically the heaviest month for demand as more Americans hit the road, so this trend of easing prices could be short-lived,” AAA spokesman Andrew Gross said in a statement.

Looking ahead, Tom Kloza, global head of energy analysis for OPIS, projected demand to pick up later in July due to lower gasoline prices and recent disruptions in domestic air travel.

“There are more upside risks than downside risks,” Kloza told the WSJ. “It’ll be all about supply next month, and whether supply is threatened.”

Specifically, Kloza highlighted the upcoming summer hurricane season, which could disrupt refineries around the Gulf of Mexico, contributing to an already-tight supply.

Meanwhile, ongoing disruptions resulting from the Russia-Ukraine conflict could further weigh on supply. If the Organization of the Petroleum Exporting Countries also refrains from raising output, oil and gas prices will be elevated later this year.

Bart Melek, head of commodity strategy at TD Securities, warned that the only way oil prices will remain depressed is if there is an economic recession with sapped demand growth.

For more news, information, and strategy, visit VettaFi.