Prices at the pump continue to level off following a 40-day upswing that ended on March 8. The national average price of regular unleaded gasoline was $2.43 Friday, down a penny on the week. While 15 cents higher than month ago prices, Friday’s average remained $1.10 below year ago prices. The national average tends to moves higher this time of year because refineries conduct planned maintenance, which can limit fuel production. Refineries are also beginning to transition to summer-blend fuel in advance of the May 1 deadline. As part of this process, refineries draw down current inventories of winter-blend fuel, which can further constrain supplies.
The global oil market remains oversupplied and relatively high U.S. production levels continue to support bearish market sentiment. The possibility of geopolitical events in major production regions is likely to keep the market relatively volatile in the near term. Speculation is beginning about the agenda for OPEC’s first scheduled meeting of the year, and whether the cartel will intervene to cut oil production in order to pressure prices higher in the global market. Without signals of a decision being made in advance of this meeting, the market will be left to find its own floor. Crude oil dropped to a six-year low mid-week amid projections from some that prices could eventually fall into the $30 range, due to high inventories and ongoing stock builds. At the close of Friday’s formal trading on the NYMEX, crude oil settled at $46.29 per barrel.
The Energy Information Administration (EIA) noted in its weekly report that crude oil inventories exceeded its modern-day records. Crude oil inventories rose 9.6 million barrels to 458.5 million barrels, which is 82.7 million barrels above last year and could soon be 100-million barrel year-over-year surplus in crude. Gasoline stocks fell unexpectedly by 4.5 million barrels to 235.4 million barrels, but analysts believe stock builds may be more likely than draws in the coming weeks. Gasoline demand grew 745,000 barrels per day (bpd) on the week to 9.26 million bpd and was 748,000 bpd above same week last year. The four-week average demand is up 4.3 percent from last year and year-to-date numbers are up 4.1 percent.
“Though some U.S. refinery issues are not resolved, abundant supplies and a stronger U.S. dollar have pulled the price of crude lower and contributed to falling gas prices,” said Tracy E. Noble, spokesperson for AAA Mid-Atlantic. “Given current market factors, motorists should continue experiencing relief at the pump in the short term.”
The Week Ahead
AAA suggests gas prices may continue to drop in the next few weeks due to a steep decline in the cost of crude oil. Crude oil prices tumbled more than 10 percent last week due to abundant supplies, a stronger U.S. dollar, and the possibility of even more oil entering the market soon. Every $10 per barrel decline in the cost of crude oil can send gas prices down by nearly 25 cents per gallon.
CURRENT AND PAST GAS PRICE AVERAGES
Regular Unleaded Gasoline (*indicates record high)
|03/20/15||Week Ago||Year Ago|
|Cape May County||$2.18||$2.24||$3.36|
|Middlesex, Somerset, Hunterdon||$2.19||$2.25||$3.37|
|Monmouth, Ocean Counties||$2.21||$2.26||$3.38|
|Crude Oil||$46.29 per barrel||$45.11 per barrel||$99.43 per barrel|