Tuesday, April 10, 2012

Gasoline Prices Rolling Over

First up, Calafia Beach Pundit:
The threat of higher gasoline prices is receding
According to AAA, the nationwide average price of regular gasoline is $3.93/gal. (In California we are paying well over that, with prices for premium approaching $5/gal.) As the chart above shows, gasoline prices today are about as high as they have ever been. Does this pose a threat to our struggling economy? While it's undoubtedly a problem, I think it's more in the nature of a headwind rather than a big recession threat.

The chart above compares the nationwide average price of regular gasoline (orange line) with the price of nearby wholesale gasoline futures prices (white line). Note how well these two series track each other, but especially note that the orange line tends to lag the white line a bit. That makes sense, since future prices operate in real time and wholesale prices necessarily lead retail prices. Note also how wholesale prices have rolled over in the past week, and are basically unchanged over the past month....MORE
And from Sober Look:
Brent-WTI spread update
Here is a quick update on the Brent-WTI spread dynamics. As discussed earlier the US crude inventory and the Iran uncertainties have been the drivers of the spread. The Iran situation has not changed much since, although nuclear talks are now a certainty. Iran has no real choice but to agree to the talks.

As far as the US crude inventories, the amount of crude oil in stock continues to rise, now near the top of the 5-year range.

Source: EIA
That has not only stalled the rally in crude oil, but also widened out the Brent-WTI spread to above $20/barrel.

Brent-WTI spread (Bloomberg)

Again the reason for monitoring this spread closely is that US gasoline prices correlate closer to Brent prices than to WTI. The chart below shows the spread between US Gasoline Futures and WTI Futures (the gasoline crack spread), which has moved up with Brent-WTI spread....MORE