Average gasoline prices will fall slightly again this week, continuing last week's trend lower. Over the last week, prices have begun to fall after a large surge in prices several weeks prior.
Much of the reason for the downturn is due to Chinese authorities who increased interest rates last week, hoping to slow their economy (and in turn slowing economies of major trading partners). The news of the surprise increase in interest rates in China sent the dollar soaring, easing pressure on oil prices, and helping gasoline futures edge lower as well.
We're feeling the impact of last week's downturn this week, and many areas of the United States should see price averages dropping. We also got good news last week out of Washington state, when Tesoro indicated it was restarting a refinery that had been in repair for months following a fire in April.
It seems that this week there are more events and news putting pressure on prices to drop than there is for prices to increase- but as the week moves on, the chance of that holding true drops.
Tropical Storm Richard isn't forecasted to do much after entering the Gulf, with current forecasts showing it dissipating in the Gulf later this week.
Refiners also continue to finish their maintenance before heating oil season begins, helping pressure prices lower as more capacity comes back on line. Refiners typically do maintenance ahead of peak seasons (summer and winter) to shift their plants to output more gasoline during the summer, and more heating oil in the winter.
I expect we'll see utilization rates relatively stable in this week's DOE report- perhaps a slight decline or a slight gain, but as we move forward from here on, utilization rates will rise, putting pressure on prices to fall.
We'll carefully be watching earnings reports from major U.S. companies this week- which is about the only way we could see pressure on prices to increase- if we see a majority of earnings reports much better than expected, prices may rise.
Overall, I expect that the U.S. and Canadian averages will slowly drop this week, ending the weekend near $2.79 and 103c/L, respectively.