While energy market watchers have highlighted President-Elect Trump’s nod towards drilling and fracking, we believe that a Trump administration will have a larger impact on the US demand side of the ledger. The two key regulations which, if repealed, could drive US gasoline demand materially higher are the Corporate Average Fuel Efficiency Standards (CAFE) and the Renewable Fuel Standard (RFS). The potential impact of a Trump presidency on US gasoline demand is not one that should be underestimated. After all, US gasoline demand comprises of nearly 10% of total global oil demand and has been the sole bright spot in the OECD region, which has otherwise been trending lower on a structural basis since the recession. The potential repeal of aforementioned regulations is unlikely to make a difference in his first 90 days in office, but it is a rather bullish potential catalyst in the quarters and years to come.

Eoin Treacy's view

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An additional bullish potential outcome for gasoline prices is that the millennial generation is increasingly turning towards car ownership after a delayed start which should at least put a partial floor under demand.

Gasoline experienced a sharp rebound from the February low and has been confined to a ranging consolidation for much of the last six months. It has stabilised near the lower side of that congestion area over the last few days but a clear upward dynamic will be required to confirm return to demand dominance beyond short-term steadying in this area.

The potential for meaningful regulatory changes in the energy sector, discussed in the above piece, could have a transformative effect on distillate prices over the short to medium-term; at least before electric vehicles assume a greater market.