In another sign that we are seeing a major shift in the fundamentals of the US oil market yesterday's Energy Information Administration weekly Petroleum Status report provided more evidence for my prediction that US gasoline prices may have peaked forever. Refiners just rocked an abundance of relatively cheap crude supply drove refinery runs to 92.6% the highest level since July of 2007. For those of you keeping score that is before that financial crisis really began to break and gas demand in the US was near record highs. The reason for the surge in runs is because of the booming US and Canadian oil production. The reversal of the Seaway Pipeline has helped gulf coast refiners turn huge profits. Gulf Coast oil supplies hit the highest level since May of 2009 and refining margins have improved dramatically because of that abundance of crude Gas production soared to 9.3 million barrels per day increasing gas inventory by 2. 1 million barrels which is the lower end of the average range for this time of year.

Yet while the refiners ramp up demand is still weak by historical standards. Gas demand as inferred by the EIA data is still down 4.8% from a year earlier. This is a clear sign that gas demand in the US has been hit with permanent demand destruction.

Still gas demand is expected to improve this Fourth of July. AAA as reported by the Wall Street Journal says that Fourth of July travel is expected to jump nearly 5% this year from 2011. But because the holiday falls on a Wednesday, travel plans are likely to be spread over more days, which could ease congestion. Lower gasoline costs also should mean smaller fuel bills. {WOO HOO!}

AAA estimates 42.3 million Americans will travel 50 miles or more from home during the coming holiday period, a 4.9% jump from last year. The projected travel volume matches that of 2007, the high point of the past 10 years, and marks an increase of nearly 42% from 2009.

The Independence Day travel period is normally five days long. But because the holiday falls in the middle of the week, people are expected this year to be traveling for six days, with the option of including a weekend and two week days either before or after the actual holiday. AAA defines the 2012 holiday travel period as Tuesday, July 3, to Sunday, July 8.

Crude supply over all did fall in the report and that coupled with better than expected US economic data gave oil a bit of a boost. Still today with German data weak concerns over what may not happen at the EU summit may damper the budding economic optimism.

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 Phil Flynn