(Oil & Gas 360) – Getting Oil In The Forms It Is Needed Where And When Needed, Having Prices Profitable, For A While, Supports Our Bullish Oil & Natural Gas Outlook.
Retail gasoline prices jumping up toward the highs of year 2024 is a cost of taking out those who kill, maim and destroy to rule. Operation Epic Fury had the average retail price of gasoline for the U.S. jump 63.8 cents per gallon, from $2.995 at the end of January to $3.633 last week (Figure 1, blue line). And the average West Coast price jump 86.3 cents, from $3.827 to $4.69 (red line).
The jump in retail gasoline prices reflects the jump in the cost of crude oil needed to produce the gasoline. The spot market price of West Texas Intermediate crude oil increased seasonally, from its Christmas/New Year’s Day Holiday low near $55 per barrel, to $65 before Operation Epic Fury (Figure 2, red line). The Strait of Hormuz closed for all but Iranian crude oil had it $94.65 Monday. The $40 per barrel jump is equivalent to $1.68 per gallon.
The jump in the spot price of WTI occurred despite U.S. crude oil inventory increasing another 3.8 mmb last week. The seasonal increase in the price of crude oil occurs despite crude oil inventory increasing from its beginning of the year low (Figure 3, red line). Last week’s 3.8 million barrel (mmb) increase to 443.1 is 24 more than 419.1 as the year began. And it is 7.9 mmb more than 435.2 last year (blue line).
Word that an IEA agreement reached for a 400 mmb release of Strategic Petroleum Reserve inventory, from member countries, has helped have $87.25 per barrel yesterday’s near-month closing futures contract price. The Attack on America had U.S. Strategic Petroleum Inventory (SPR) be increased from 540 mmb as year 2001 began to 727 as 2010 began (Figurer 4). It was used to offset all the supply disruption from Russia invading Ukraine which dropped it to 350. News, that member countries of the International Energy Agency (IEA) will release 400 mmb helped reduce the closing futures price for March 2026 delivery from $94.77 per barrel Monday to $87.25 yesterday.
While $87.25 was yesterday’s near-month closing futures price, $95 today reflects the reality of getting what is needed where it is needed, when it is needed. Over the last four weeks, crude oil imports arriving from Iraq and Saudi Arabia averaged 0.818 million barrels per day (mmbd). SPR supply used to offset Russia’s invasion of Ukraine began at a flow rate around 0.400 per day, after periods of around 0.200 (Figure 5). It took 9 months for the flow rate to reach its 1.200 mmbd maximum rate. Oil prices reflect what someone is willing to pay to get a cargo/shipment needed, that who has it is willing to be paid to give it up.
By oilandgas360.com contributor Michael Smolinksi with Energy Directions
The views expressed in this article are solely those of the author and do not necessarily reflect the opinions of Oil & Gas 360. Please consult with a professional before making any decisions based on the information provided here. The information presented in this article is not intended as financial advice. Contact Energy Directions for the full report. Please conduct your own research before making any investment decisions.
