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Fuel prices sit about $.30 higher today than the beginning of the month as we broke out of the comfortable range in MAY through JUNE. The three week rally can mainly be tied to production cuts, unpredictable inventory reports and mostly an optimistic view on the overall health of the US economy. The bright side is we are over $1.00 lower than this time last year. The question remains, does this rally have any legs?
The markets were initially up somewhat today on EIA inventory reporting and projected slowdowns in US Shale production through 2020.
2015 is off to a wild start, with Crude dancing around and then dropping below $50/bbl. Wednesday (the 7th) Crude closed out at $48.65, yet another 5 year record. Gasoline and distillates have closed down every day this week, so it looks like the 2014 slide has no intention of stopping.
Goldman Sachs has revised its projected oil prices for 2015 to $75/bbl for WTI and $85/bbl for Brent Crude, in response to ramped up supplies and slow projected global economic growth.
Production from the US, Brazil, and the Gulf is projected to increase almost 1 million bpd, combined, and OPEC production is assumed to remain more or less stable - with gains in Iraqi production and drops in Libyan output essentially cancelling one another out.
Thursday we saw ULSD settle out to erase most of Wednesdays drop - Wednesday it closed down -.0136 to 2.4586, and Thursday settled out at 2.4703 (+.0117). Gas not only erased Wednesday's 3 cent drop, but rebounded up +.0622 for the day to 2.2109. This morning, ULSD is trending up about a penny/penny and a half, while gas is hanging in the +.005 range, both having backed off earlier jumps.
So what's going on?