The market is over flooded with crude oil as traders are buying crude and putting into storage in hopes that it will be worth more at a later date. Oil tankers are being leased at sea. Storage space for crude became very hard to find at a key delivery point when the January contract expired a few weeks ago as unwanted oil flooded the market. It’s a simple supply and demand issue. Still plenty of supply and not enough demand.
New week, new action, what are fuel prices going to do this week. The Sokolis Group still believes that there is room for prices to move lower, of course if we were as smart about the fuel market as we are about fuel management the company would be worth tens of millions of dollars. Here is why we believe prices will fall lower. This week oil prices fell as data showing a big rise in U.S. unemployment deepened the gloomy outlook for the world’s biggest oil consumer. U.S. employers slashed payrolls by 524,000 in December, driving the national unemployment rate to its highest level in almost 16 years, a government report showed, suggesting the year-long recession was deepening.
Just when everyone was starting to worry the fuel prices were headed higher we find out that we have a lot of inventory. Fuel prices plunged across the board Wednesday, giving up a week of gains with unexpectedly large U.S. crude reserves suggesting demand for energy has eroded even further.
The slide in gas and diesel fuel has slowed down and has actualy started to climb back up recent days amid indicators that the national average could jump to $2 a gallon or higher this spring.
There is no peace in the Middle East. Conflict between Israeli and Gaza continued for its 7th day. Meanwhile Russian gas monopoly Gazprom has cut off gas shipments to Ukraine since Thursday in a dispute over payments, and Ukraine warned that European customers could see serious natural gas disruptions in about two weeks.
A Federal Commission created by Congress to find ways to help build and repair highways and bridges is recommending a 50% increase in gas & diesel fuel taxes. Is this the right thing to do as the economy is in a recession? Can we really afford this as a country? Yes and Yes. I know for some of you that sounds crazy. Let me explain why….
As Fuel flows out of the year into a new year, what a crazy year it has been. Fuel costs shooting through the roof then dropping like a brick. (See Graph below of the last 2 years). What will fuel costs bring next year, is anyones guess. The educated side of us, says that it will remain flat throughout the year just as the economy probably will. Not even hurricanes Gustav and Ike in the Gulf of Mexico in September or the Middle East conflict between Israel and Hamas has been able to stop crude’s slide. A sign that the economy has a very strong hold on oil prices.
Prices had jumped as much as 12 percent on Monday after Israel launched its fiercest air offensive in the Hamas-ruled Gaza strip in decades. Hamas sent missiles deep into Israel on Monday, three days into Israel’s punishing air offensive in Gaza. Four Israelis, including a soldier, were killed and eight wounded. Palestinian health officials put the three-day death toll in Gaza at 364; the U.N. said the total included at least 62 civilians.
Early Tuesday, Israeli aircraft dropped at least 16 bombs on five Hamas government buildings in a Gaza City complex, destroying them, witnesses said. Israel’s defense minister Ehud Barak promised a “war to the bitter end against Hamas” and allied militants.
With Christmas over those on Wall Street need something to get their week jumped started before the New Year.
Oil prices increased today and low demand after the holiday. Fuel prices will probably go lower next week based on week demand numbers reported by the EIA.