Crude oil prices are treading water after the oil market rallied sharply last month. At about $47.50 per barrel, benchmark West Texas Intermediate is off slightly from a week ago because of lingering oversupply concerns. Despite pledges to cut production, OPEC actually boosted its collective exports. Meanwhile, U.S. oil production continues its slow but steady rise. And now, with the summer driving season wrapping up, oil demand is likely to soften.
We see WTI trading between $40 and $45 per barrel in December, down modestly from its current level. Global stockpiles of oil and refined fuels held in storage remain higher than normal, and global demand just doesn’t look strong enough to soak up the excess supply anytime soon.
Prices at the pump are largely holding steady. At $2.34 per gallon, the national average price of regular unleaded gasoline is down a penny from a week ago. We look for the average price to remain between $2.30 and $2.40 for the rest of the summer. The price of diesel, now averaging $2.53 per gallon, is also unlikely to move much.
Natural gas prices are also stuck in a rut. At $2.96 per million British thermal units (MMBtu), the benchmark gas futures contract remains very close to our expected summer trading level of $3. A major heat wave could change that by stoking electricity demand and forcing gas-fired power plants to kick into high gear. But weather forecasts aren’t calling for such a scenario, meaning that gas demand figures to remain modest. That should keep gas futures prices near $3 per MMBtu until fall temperatures goose heating demand.
Source: Department of Energy, Price Statistics