If you haven't visited our
Facebook Page, perhaps you don't know that gasoline prices are poised to rally in the next few days. Prices already spiked in areas of the Midwest, increasing to $2.699 late yesterday after wholesale prices increased.
Much of the reason for the rise this time seems to be the large withdraws from crude and distillate inventories as of late. While the U.S. dollar continues to rally, the focus has been shifting towards a continued rally in U.S. stock markets. Another major reason for prices increasing has been the extended cold weather across much of the nation, driving heating demand, resulting in high use of fuels and heating oil. (READ MORE!)
I'm quite concerned about the possibility of a large draw again tomorrow, when the Department of Energy releases its Weekly Petroleum Status Report. Any large draw in stockpiles would cause reason for prices to rise as inventories shed millions of barrels of products in storage.
The cold weather will likely continue, with the Climate Prediction Center forecasting continued colder than average temperatures over more than half of the United States for the next 8-14 days. This will likely cause demand to continue to be high, reducing stockpiles.
As of the last DOE report, oil inventories stood 1.1% higher than a year ago, with the real possibility of dropping below that as soon as tomorrow. Gasoline inventories now stand just 3.4% higher than a year ago while distillate inventories remain the only bright spot, coming in 14% higher than a year ago. The amazing story is that just weeks ago, distillate stocks were nearly 40% higher than a year ago, and now that gap has closed considerably.
All this will lead to gasoline prices that will rise to an average $2.65-$2.75 into the first weeks of 2010, with the real potential to hit $3 even before we see the earliest signs of Spring. Let's hope it doesn't get that bad, but we should be prepared to see higher prices coming soon to a pump near you.