| Gasoline softens after brush with $3+/gallon |
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Jon
Preferred Member
Cash: $ 50.02
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Joined: 13 Apr 2005
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| Gasoline softens after brush with $3+/gallon |
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Last week we learned that gasoline demand started to decline two weeks back when prices breached $3/gallon. Oil had hit $75/bbl once more and gas contemporaneously touched $3/gallon. That was enough to stall out demand a bit. In the fall after the storms, demand stalled as gas spiked quickly higher. This time gasoline’s climb was slower, and thus some thought that the consumer would adapt. Seems the water torture technique had the same effect at roughly the same price level; demand dropped and prices, both oil and gasoline, have backed off.
The Lundberg survey Monday also suggested that prices have peaked . . . for now. That does not mean oil and gasoline prices are heading lower longer term. This is the second time oil has hit near $75/bbl and the second time it has fallen back from that level. That creates a bit of resistance at $75 and could be the start of a double top. Still too early to make that call.
There is one call we can make, however. If anything transpires to hamper supply of either, prices will jump right back up. We were anticipating $3/gallon oil this summer, and it hit it in April, far ahead of any storm. When oil started its run toward $75 we were concerned gasoline would follow and it did. Last week there was some help from the first rise in gasoline inventories in 9 weeks. If that continues this week oil might weaken a bit more. There are already storm systems and waves out off the west African coast, however. The first one that ignites and heads toward the Gulf of Mexico will stir memories of last summer and give gasoline another goose higher. We need to get through a storm or two that misses the mark for the energy market to adjust to a new storm season. For now we are going to see just how much more gasoline drops and then go fill the tanks.
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Thu May 11, 2006 2:30 am |
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