Oil prices were heating up in July as was the rest of the country with triple digit temperatures. WTI Crude continued to gain steam throughout the month as prices approached $80/barrel for the first time since mid-April. The following graph shows the daily price movements over the past three months:
Things change quickly in the oil market. By mid-month, crude prices had shot up into the mid-$70s per barrel. The current concern is that oil supplies could begin to tighten during the remainder of 2023 with Saudi Arabia’s production cuts. Also not helping was Libya’s largest oilfield halting production due to protests.
The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:
Unfortunately for diesel and gas consumers, the long run of declining prices stopped in July. Retail and wholesale prices both increased in July for both products. Profit margins for gas and diesel were slightly down compared to the prior month. The margin decline was due to wholesale prices reflecting the increase in oil prices quickly while retail prices were slower to respond. The following graph shows the retail margins over the trailing 15 months:
Crack spreads continue to be consistently around $1 in 2023. A slight decrease in July compared to last month as shown in the graph below:
As expected with increasing oil prices, fuel pump prices were also on the rise. According to AAA, the national average gas price rose by about $0.22 to $3.76/gallon. Diesel prices also reversed compared to last month and increased by roughly $0.18 to $4.04/gallon.
The heatwave across the country did not help with the already tightening supply market mentioned earlier. Some refineries in key areas across the country were unable to operate at full capacity with the record-breaking temperatures. Indications that Saudi Arabia will continue with their current supply cuts and a rosier demand picture have all caused oil prices to surpass $80/barrel. We are now technically in hurricane season and any disruptions caused by weather could cause prices to increase further.
Sokolis will continue to monitor the many factors going into fuel prices. As of now we anticipate that oil prices will range between $75-90/barrel.
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