According to AAA, the price of crude oil has increased to $70/bbl, its highest price since October 2018 and is now $23/bbl more expensive than it was this past January. Crude prices have steadily climbed this year along with optimism for the COVID-19 vaccine and the promising impact it will have for global gasoline demand.
“Motorists are paying, on average, 37% more to fill up than the start of the year,” said Jeanette McGee, AAA spokesperson. “Prices for the rest of the month are likely to push more expensive, but if crude production increases, as forecasted, there is the possibility of seeing some relief at the pump later this summer.”
Market analysts are keeping a close eye on global supply and demand levels. They are especially eager to see if the Organization of the Petroleum Exporting Countries (OPEC), and its allies including Russia, follow through with production increases next month. This move could help put downward pressure on crude prices and, in turn, push gas prices less expensive. However, motorists likely would not see any impact at the pump until mid-to-late July.
Today’s national gas price average is $3.08, which is three cents more on the week, a nickel more on the month and 98 cents more on the year. The latest increases at the pump are attributed to the steady climb in crude prices, especially as demand decreased (−670,000 b/d) and supply increased (+7 million bbl), according to the latest Energy Information Administration (EIA) data. The decrease in demand was surprising as it reflects the Memorial Day holiday, which was expected to inject higher gasoline demand.
- The nation’s top 10 largest weekly changes: Michigan (+15 cents), Florida (+11 cents), Ohio (+10 cents), Texas (+7 cents), Illinois (+5 cents), Wyoming (+5 cents), Colorado (+5 cents), North Dakota (+4 cents), Wisconsin (+3 cents) and Indiana (−3 cents).
- The nation’s top 10 least expensive markets: Louisiana ($2.71), Mississippi ($2.72), Oklahoma ($2.74), Missouri ($2.76), Texas ($2.76), Arkansas ($2.76), South Carolina ($2.79), Alabama ($2.81), Kansas ($2.85) and Minnesota ($2.85).
Oil Market Dynamics
At the close of Friday’s formal trading session, WTI increased by 62 cents to settle at $70.91. After crude prices crossed the $70/bbl threshold last week, a point they had not seen since mid-October 2018, they continued to increase due to optimism that vaccine rollout will continue to help crude demand recover and after the U.S. Consumer Price Index showed that prices increased by 5% in May, compared to last year, a larger increase than expected.
The new report is fanning market concerns that inflation is driving prices higher. Additionally, crude prices were bolstered by EIA’s latest report revealing that total domestic crude supplies decreased by 5.2 million bbl to 474 million bbl last week. For this week, crude prices could continue to rise if EIA’s report shows another inventory decline.