As we enter the summer months, vacationers and leisure drivers may breathe easier. Gasoline, along with exchange traded funds tracking the movement in gas prices, is pulling back, with Middle East tensions easing and demand slackening.
U.S. Gasoline Fund (NYSEARCA:UGA) is down sharply over the past month and is now testing its 200-day support level.
According to the U.S. Energy Information Administration, the average price on regular gas dipped to $3.79 a gallon Monday, or down 3.8% from its 2012 peak of $3.941 on April 2, reports Liam Pleven for the Wall Street Journal.
The fundamentals are shifting in the gasoline market. Tension over Iran's nuclear ambitions has eased, the U.S. and Europe are showing softening demand, refineries previously slated to close are back up and the supply of crude oil is opening.
Consequently, analysts now project that their previous forecasts of summer gas to hit $4 to $5 are highly unlikely, which will benefit the economy from the bottom up as it would have constrained consumer spending and confidence - the EIA calculates a 10-cent decline translates to an extra 0.1% in disposable household income.
In the futures market, gasoline for near-term delivery is down 6.6% this month and 13% below the last peak in March. It should be noted that it takes weeks before the drop in the futures markets show up at the gas pump.
"We feel quite confident saying that prices have peaked for the first half of 2012," absent a fresh crisis," Avery Ash, manager of regulatory affairs at AAA, said in the article.
U.S. Gasoline Fund
Max Chen contributed to this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.