The dollar has strengthened ~6.5% versus the euro over the last few weeks, adding to the reduced demand to lower the global price for oil almost 22% from its record high of early July. While some forecasters think oil can fall to as low as $75 per barrel, some significant resistance will probably emerge to prevent price moves much below $115. Recent news that tropical weather forecasters believe the coming months will be an above average hurricane season certainly keeps a risk premium on top of the Gulf of Mexico oil that we depend on. So, oil prices look to be fickle over the next few months while some bullish price pressure may arrive during the peak oil demand of the Northern Hemisphere’s winter.
The situation for natural gas continues to mirror that of oil. It is very high compared to last year, but has fallen significantly since early July. The weekly natural gas report was in line with the recent trend of rising inventories on the back of increased domestic production that offsets import reductions from both the global LNG market and the pipelines of Canada. Supplies look to be below last year’s levels by ~10% though they should be ample to handle an average winter.
If the dollar continues to strengthen we could see a bearish trend develop further. But if you are planning your driving schedule for the year ahead, I would recommend not banking on pump prices falling much below $3.50 and actually anticipating the potential for new record prices if this winter is an especially cold one. Efficiency is always a great hedge, whether it means carpooling, weatherizing one’s home, or using the bicycle for more daily trips. Let’s keep making progress in the Sustainable Energy Transition.
Tags: natural gas prices, Oil