Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gasoline Makes Crude Oil a Buy on Any Pullback

Commodities / Crude Oil Apr 18, 2010 - 04:16 PM GMT

By: Dian_L_Chu

Commodities

Best Financial Markets Analysis ArticleCrude futures ended at their lowest point this month Friday, as investors fled riskier assets after regulators charged Goldman Sachs with fraud. West Texas Intermediate (WTI) crude for May delivery settled down at $83.24 a barrel on the New York Mercantile Exchange (NYMEX), the lowest settlement since March 30.


The Goldman news prompted a broad sell-off, which ended the S&P 500 weekly wining streak. Gasoline also fell more than 2% after the news. Gasoline for May delivery fell to $2.277 a gallon on NYMEX, the largest decline since Feb. 25

Nonetheless, industry insiders are fully expecting this still intact seasonal pattern: a rise in gas prices in the months ahead during the summer driving season (from April 1 to Sept. 30).

Regular-grade gas prices will average $2.92 per gallon during this summer's driving season, according to the EIA's April 2010 Short-Term Energy and Summer Fuels Outlook. That's up 48 cents from $2.44 per gallon last summer--and higher than the $2.86 current national average. (Fig. 1)

Crude oil represents the biggest cost component and typically makes up between 65% and 70% of the total cost of one gallon of regular gasoline. Oil prices have risen 67% in the past year, and have stayed in the mid-$80 range after jumping to above $87 earlier this month.

Crude futures were already trading lower prior to the Goldman news on the usual pattern of Friday`s being profit taking days for traders not wanting to carry positions into the weekend. However, the Goldman news exacerbated the sell-off in the crude market, as new information was being digested by investors.

But the dynamics that make Crude Oil and other asset classes like Gold and Equities attractive for investors going forward are still in play with zero-percent interest rates, global governmental printing presses, currency devaluations, and lack of alternative investment classes like real estate or large scale industrial projects which rely on much healthier credit markets to finance.

Crude Oil has one other factor that Gold and Equities do not have going for them right now. This is the heat of the seasonal summer driving season where the weather is much nicer, people take advantage of the nicer weather to get out and travel more, take vacations over the holidays, and use more gasoline in this April through July stretch. This seasonality dynamic causes prices at the pump to rise due to increased demand, which raises the price of Crude Oil in the process.

It is this increasing gasoline demand that will drive Crude Oil for the next 10 to 12 weeks from the products side, and it is the reason that Crude is one of the favorite asset classes for investors during this seasonal driving season.

So expect any pullbacks in Crude over the next 12 weeks to be bought up by investors, and look for Oil prices to be higher each month as gasoline prices at the pumps rise to meet the increased driving demand.

The latest inventory data supports this view as the government reported a bullish inventory report with a surprise drawdown of 2.2 million barrels in domestic crude supplies in the week to April 9. Gasoline data also showed a 1.1 million-barrel drawdown. (Fig. 2)

The recent pullback in Crude Oil provoked by the SEC’s Goldman charges could be one rare entry point for investors at the start of the annual driving season uptrend.

A decline in crude stocks and bigger-than-expected draws in gasoline stocks coupled with global equity markets rallying and zero interest rate policies puts a bullish backdrop firmly in place, making a demand driven run to $90 and beyond seem likely before the July 4 weekend.

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.

© 2010 Copyright Dian L. Chu - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in