This week, EIA released its April Short-Term Energy Outlook with the expectation that U.S. gasoline price will peak at a national average of $3.66/gallon in May before softening into 2015. EIA does note, however, that select regions may be above or below the projected national average by as much as +/- 25 cents. The expected price slide is based on both crude oil prices and gasoline crack spreads (the difference between wholesale product price and the price of crude oil) which are forecast to decline.
According to EIA, On April 7, the national average regular-grade gasoline retail price stood at $3.60/gal. Most of the expected increase from the current price over the next several weeks is attributable to an increase in crack spreads as a result of typical seasonal factors such as refinery maintenance and the switch to summer-grade gasoline, which is more costly to produce than winter-grade gasoline. Gasoline crack spreads are expected to average 44 cents/gal in May, up from an average of 15 cents/gal during the first quarter.
Retail prices are expected to gradually decline after May to an average of $3.46/gal in September. The largest driver of the expected decline is falling gasoline crack spreads, which are expected to decline to an average of 29 cents/gal in September. The expected decrease in crack spreads results from a projected increase in crude oil throughput at refineries, which add supplies to the market, along with easing seasonal demand increases as the summer progresses. North Sea Brent crude oil prices are projected to fall from a March average of $107 per barrel (bbl) to a May average of $105/bbl and a September average of $103/bbl. The May-to-September crude oil price drop contributes almost 5 cents/gal to the projected decline in gasoline prices, EIA said.
Lower prices are expected ahead for farm diesel and propane. We are waiting on both to move lower in the coming weeks with farm diesel expected to bottom and flatten late this month. Propane has a little more time than does farm diesel, and we will look for buy signals in the summer months, probably around the first of July.
Crude Oil --
May 2014 WTI crude oil opened this morning at $103.44 -- $4.15 above the same time last week. Next support is at $102.00 and $98.86. A move back above the March high at $104.48 would open the door to upside risk to $112.24. April 14 heating oil opened today at $2.95, four cents above last week.
May 2014 Brent crude oil futures opened at $107.69 -- $2.72 higher on the week. Next support lies at $104.97 and $102.64 and a move below that level would clear the way to bears' target of $100.98. Tough resistance lies at $110.33 and $111.32 along the way to $116.50.
The WTI/Brent crude spread narrowed $1.43 on the week to $4.25 at the open, with Brent at a premium.
- U.S. crude inventories gained 4.0 million barrels (mmbl) to 384.1 mmbl -- now 4.8 mmbl below year-ago.
- Gasoline inventories fell 5.2 mmbl to 210.4 mmbl -- 11.9 mmbl below year-ago.
- Distillate stocks firmed 0.2 mmbl to 113.2 mmbl -- 0.4 mmbbl above year-ago.
- National propane stocks gained 1.016 mmbl to 27.584 mmbl -- 12.441 mmbl below year-ago.
Highway Fuels --
Gasoline firms, highway diesel softens.
Average U.S. regular gasoline prices increased two cents from last week to $3.60 per gallon as of April 7, 2014, a penny less than a year ago. The Gulf Coast had the largest price increase, rising five cents to $3.39 per gallon, followed by the West Coast with an increase of three cents to $3.88 per gallon. East Coast prices increased by two cents to $3.58 per gallon. The Midwest price decreased by a penny to $3.58 per gallon, while the Rocky Mountain price decreased by half a cent, but remained at $3.45 per gallon, according to EIA.
U.S. diesel fuel prices decreased in all regions to average $3.96 per gallon, down two cents from last week and from the same time last year. The East Coast, Rocky Mountains and Midwest each fell by two cents, to $4.08, $3.96 and $3.94 per gallon respectively. The Gulf Coast and West Coast prices each decreased by a penny, to $3.79 and $3.98 per gallon respectively, according to EIA.
Look for information and statistics on LP and Farm Diesel in our weekly 'Farm Fuels in Focus' report.
Graphs and indicated text provided by EIA.