WTI crude oil averaged $82.41 per barrel in June and was as high as $87.22 last week before falling to $83.91 today. June average monthly retail gasoline and diesel fuel prices were $3.539 and $3.759 per gallon, respectively.
Gas prices have dropped $0.13 per gallon while diesel is down $0.08 per gallon compared to the June averages. Overall, prices remain low amid economic indicators that demonstrate slowing growth in China, Europe and the U.S.
Market factors that are placing downward pressure on prices:
- Chinese trade data shows a weakening economy: June imports were less than analyst forecasts and down by half from May’s growth rate and export growth declined to 11.3% from 15.3% in May.
- Continued worries about Europe’s economy and its ability to stabilize its debt crisis despite its lifeline to Spain.
- Disappointing U.S. job statistics show that the unemployment rate has remained unchanged at 8.2%.
Market factors that may result in higher gas prices and diesel fuel prices:
- The official beginning of the EU’s embargo on Iranian oil exports began July 1st, causing Iran to threaten to block the strategic Strait of Hormuz at the mouth of the Persian Gulf, the passageway through which a fifth of the world’s oil flows.
- Total gasoline inventories are below the five year minimum for this time of year with an increase of only 0.2 million barrels last week. Tighter supplies generally translate to higher prices.
- Diesel fuel prices raising if the price of crude oil climbs
We still look into that crazy crystal ball that we have here at Sokolis that has a predition ratio of about 50% right and think that diesel fuel prices will go below $3.50 a gallon and gas pricing will go below $3.00 a gallon. Only time will tell. We could hedge our crystal ball and say we believe diesel fuel prices won’t go higher than $5.00 a gallon by the end of the year, nor will gas prices go higher than $5.00 a gallon but that might be too easy.
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