NEW YORK -- As a weak fuel-margin environment in early spring ended with a strong May, expect June fuel margins to moderate in June.
According to a research note by Raymond James & Associates, national retail fuel margins for regular gasoline in May were 19% higher, or up 3.2 cents per gallon (CPG), compared to a year ago, averaging 19.7 CPG. They also improved 45% sequentially over April levels, which were at a 15-month low.
But retailers and the public convenience store operators followed by Raymond James--CST Brands, Murphy USA, The Pantry and Susser Holdings and Casey's General Stores--likely will have sacrificed some of that gain as they absorb higher costs from the recent increase in oil prices and a 10-CPG spike in RBOB bulk prices during the second week of June.
In addition, gas prices have been relatively stable over the past six weeks, staying within pennies of the national $3.60 average, providing not much opportunity for retailers to grow margins on a price downturn, said the research note.
Raymond James estimates margins through futures contracts and pricing data from Oil Price Information Service (OPIS).
Diesel margins during the five-week period ending June 2 were on average 11% higher than a year ago or up 3.2 CPG. May gas margins rose above year-ago levels for most of the country and sequentially higher than those in March and April. In the Southeast, margins grew about 3.4 CPG year over year, or up 24%, reflecting "improved trends" for The Pantry, which is based in North Carolina. This is an 8.3-CPG sequential increase from the month prior, to reach 17.7 CPG for the 5 weeks ending June 2.
In Texas, home to CST Brands and Susser, industry fuel margins grew 21%, or about 2.8 CPG year over year. This was a 4.3-CPG sequential increase from the month prior, to hit 15.9 CPG for the 5 weeks ending June 2. Meanwhile, in the Midwest, where the Iowa headquarters of Casey's is located, industry fuel margins held steady year over year but grew 3.4 CPG sequentially from the month prior to reach 20.0 CPG.
Raymond James projects a 2%, or 0.3-CPG year-over-year increase in margin during second-quarter 2014, reflecting the seasonal improvement into the summer months. "However, margins appear likely to slide back toward levels in April near term given limited volatility in pump prices and unfavorable cost trends in early June," the research note said. As such, it is modeling margins for the publicly traded convenience stores higher sequentially from the first quarter.
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