During January 2026, gasoline prices in the US fell from recent highs as overall sentiment moved to an oversupply situation and decreased geopolitical risk. Improved diplomatic relations between the US and Iran have lowered concerns about potential disruption of Middle East supplies, leading to a decline in crude oil prices and prices for related fuels. There were short-term increases in gasoline demand due to severe winter storms impacting refinery operations and consumers stocking up on gasoline for winter storms, but these impacts were short-lived. Distillate inventories posted positive builds, providing additional confidence regarding supply levels, along with stable production plans by major producers. As such, strong inventory levels and decreasing risk premiums outweighed support from weather-related demand, causing a moderate decline in gasoline prices over the previous month.
US gasoline prices decreased in January 2026, due to a change in market sentiment and undoing some of the increases experienced earlier in the winter. The decrease in prices was driven by factors such as decreased risk from geopolitical events, adequate supplies of gasoline, and a decrease in support by crude oil markets. The temporary disruptions created by extreme winter weather caused higher demands for gasoline; however, these do not appear to have been enough to support higher prices and brought the market back into a corrective trend at the end of the month.
In January, gasoline prices fell by approximately 1.5%, moving away from multi-week highs seen earlier in the month. The decrease in gasoline price was largely due to a decrease in geopolitical risk premiums that were driven by indicators of US-Iran diplomatic engagement, thus reducing fears of near-term disruptions to supplies of crude oil from the Middle East region. As fears of crude oil shortages have waned, the energy markets have begun to unwind long positions established during prior periods of significant tension, thereby placing downward pressure on gasoline futures.
Bearish sentiments have continued to build off supply-side fundamentals. During the second half of January, US gasoline inventories posted record builds as available supply remains plentiful despite structural operational difficulties due to weather conditions. Freezing and snowy temperature disruptions caused short-term outages of refinery operations; however, refiners were able to rapidly recover to full operational status, and production levels were adequate to meet demand. In addition, distillate inventories also surprised to the upside with additional contributions in overall confidence regarding the resilience of fuel supplies.
Temporary support came from weather-related demand. There was a shift in consumer habits towards buying gas as a precautionary measure before major winter storms, which increased demand for gasoline for the short term. After those storms had passed, gas usage returned to previous levels, then the focus was back on the oversupply problems. Steady output plans from the largest oil producers contributed to the negative sentiment because they were not expecting significant increases in the global crude oil supply and support for long-term increases in fuel prices would be limited.
Gasoline prices in the US are projected to remain relatively flat with little upward movement in the short term due to high inventory levels, steady product refiners, and weak crude oil prices. Seasonal demand for product should begin to improve as we approach the spring driving season, but any price recovery is expected to be gradual. Overall, the Gasoline market participants viewed January's decrease in price as a reflection of good supply fundamentals providing a stronger negative effect than the temporary influence of weather and geopolitical instability.
