The highly regarded Lundberg Survey said that the price of regular grade gas rose 7 cents in the last two weeks to $2.92. The average price of premium was up to $3.16. The sell-off in crude, mostly due to trouble in Europe, might have helped reverse ballooning fuel prices, but it now appears that the move down was temporary.
Crude sold off from $87 to $76 over the course of the last two weeks. Oil prices have already moved above $77 today and prices on the ICE Futures exchange rose crude rose to $80.06 a barrel.
The oil leak in the Gulf will make matters worse. Short-term it disrupts the pumping of crude from the region offshore. But traders are looking well beyond that. President Obama has already said expansion of off-shore drilling to regions off the East Coast will be delayed. And, the problems with the Deepwater Horizon leak may cause the Administration to scrap its plan altogether.
China announced that its trade surplus was a very modest $1.68 billion, down 87% from the year before. A large part of its high level of imports was due to the country’s insatiable appetite for crude. While China is one of the world’s largest oil producers, its internal output cannot match the requirements of its expanding manufacturing and infrastructure base and the surge in car sales in the People’s Republic.
Many traders in crude look out a year or more. Goldman Sachs and Morgan Stanley still predict that oil prices will move to near $100 next year. Trouble in the Gulf and demand in China may cause crude prices to hit that level much sooner.
Douglas A. McIntyre
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