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Crude oil prices remain highly volatile. But they have downshifted from earlier this year on mounting concerns about slowing economic growth and fears of a potential financial crisis involving regional banks in the United States. As some of those banks have been hit by depositors yanking their cash out, oil prices have declined as traders bet that reduced bank lending will lead to a recession. And recessions are always bad for oil demand. Benchmark West Texas Intermediate crude oil recently traded at about $70 per barrel. We look for WTI to stay in a range of about $65 to $75 per barrel, with plenty of price swings up and down within that range. Any worsening of the banking situation figures to be bearish for oil prices. But on the other hand, OPEC and its allies are likely to cut back oil exports if prices start to drop too much. That ought to keep a floor under crude.
Motorists are catching a bit of a break this spring. At a time when gasoline prices tend to rise swiftly, prices at gas stations are mostly staying in check. The national average price of regular unleaded stands at $3.54 per gallon, which is actually a couple of pennies cheaper than a week ago. A year ago, gas costs were skyrocketing because of the disruptions that Russia’s invasion of Ukraine caused in the oil market. Today’s gas isn’t exactly cheap, but at least it’s well below last year’s record peak of $5.02 per gallon and holding fairly steady. Diesel fuel is also mostly behaving, with the national average at $4.03 per gallon. A year ago, diesel averaged an eye-watering $5.56.
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Mild winter weather led to a sharp drop in the price of natural gas, and for now, there are no signs of a recovery. The benchmark gas futures contract was recently trading at $2.22 per million British thermal units. At their peak last year, gas futures reached $9.50. Unseasonably mild weather in the United States and Europe this winter led to a big drop in normal heating demand, and now stockpiles of gas in storage are ample. Until demand picks up again, that glut of extra supply should keep prices fairly low, likely below $3 per MMBtu. A strong summer heat wave might be enough to spark a rally, since the United States relies heavily on gas to generate electricity, and hot weather leads to a lot of air conditioner use. But long-range weather forecasts aren’t pointing to that scenario for now.
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