Gas Prices Not Expected to Come Down Before Year's End

Dateline: Terry, Montana

The July WTI crude oil price is a basic no change, down 21 cents to $61.46 a barrel. The spot market gasoline price was up 1 cent per gallon and diesel no change on Wednesday morning. The average price for regular unleaded gasoline is $2.421 per gallon in the U.S. with the West Coast at $2.667 per gallon.

U.S. motorists were expected to drive a little more this Memorial Day weekend with renewed optimism that the economic slump has hit bottom. Expectation of gasoline use was put at 1.8% higher than it was on the Memorial Day weekend last year.

The consumer confidence index for May jumped to 54.9 from 40.8 in April 2009. The index is now at its highest since September 2008. The following graph published by the Confidence Board based on research done by TNS, Taylor Nelson Sofres PLC is the world’s largest custom market research company in 80 countries, shows the following:

click to enlarge

Over the weekend we did have some bad news with the possibility that Nigerian violence will cut oil output. ChevronTexaco (CVX) was forced to cut off about 100K barrels of crude oil supply representing about one fourth of the total output for Nigerian crude oil. Most of that crude oil is destined for U.S. refineries and any interruption in the supply of crude oil will have an immediate impact on prices.

On top of that North Korea successfully set off an underground atomic blast and also fired off missiles over the weekend. This was in an apparent attempt to prove that they are going to be capable of launching an atomic weapon at any of their enemies.

By far the most positive comment for the immediate future of oil prices was the statement released by the Saudi Arabia oil minister Ali al-Naimi over the weekend. He stated that OPEC will likely stay the course with regards to production cuts at the upcoming meeting this Thursday in Vienna. This was an advance signal of discussions between him and Steven Chu, the U.S. Energy Secretary, to show their support in assisting the economic recovery.

Take a little "Hair of the Dog" if you are having a weekend hangover but keep your gas tanks full as gasoline prices are not expected to come back down any time before the fall of this year.

Comments

[buyforeclos...:]

Higher Gas? Yeah thats good for the economy! Will the never learn? With recent news on home defaults and Jobs I think this whole oil at 70 is a joke and it may get there but will fall like a rock back to low 50's after summer...

weak dollar or not. did you forget what happened last year?

Crude is in heavy supply and demand is not what they are trying to make it out to be....u know who THEY are

I plan to take a position in DTO as soon as oil hits 70/72 with a stop in place but probably wont need it

May 28 12:22 PM

[ngass:]

People often use unsubstantiated phrases like the above: "...but will fall like a rock back to low 50's after summer. Why? Often there is no explanation. But the so-called experts are no better. About 14 years ago when crude oil was below $11 a well-known oil guru said that oil will fall to $3-5 and I sold my stocks with tremendous losses. Now, I smartened up and if a guru (maybe the sun of the first ones because of the same stupidity) said recently that he believes that oil will fall to $30 or below this summer. Why? Another said that gasoline will be 25Cents/liter this fall. Why? Either they are fools or they have a play in mind and need a large crowed to fall into their trick. If OPEC wants $75 for crude they will get it sooner or later. New explorations are on halt and if the economy improves there will be a shortage on new discovery since the lead time is about 18-24month for a new source to be tapped. Consequently oil will spike. It is also false when experts say that the US has a 72 day supply and this has to be worked down. A strategic supply of 45 days must be kept at all times. When the economy recovers the Fed has to introduce inflation to eliminate the money they printed. The Dollar weakens and oil will go up since it is quoted in Dollar. There will be hedging against inflation and this is done by getting into oil instruments. Some other gurus predict that oil will be $200 by 2012 and $300 by 2015. True or not but they give the reasons just mentioned.also

May 28 01:43 PM

[jepittman:]

with inventories here at decade highs I fail to see how a temporary 100M bpd production interruption spikes prices. Also, how many barrels a day has NOT been shipped because Kim Jong is feeling neglected and needs some attention? All this stuff does is spook traders to buy (or sell) for short term moves. What long traders need to beware of is a ticked off gasoline consumer who learned how to get by with less gasoline during the last price spike and is perfectly capable of repeating the exercise.

May 28 05:15 PM