Please enable JavaScript to view the comments powered by Disqus.

Economic Forecasts

Gas Prices to Head Higher This Spring

Kiplinger's latest forecast on the direction of energy prices

iStockphoto

GDP 2.1% growth in ’17, following 1.6% in ’16 More »
Jobs Hiring pace should slow to 160K/month in '17 More »
Interest rates 10-year T-notes at 3% by end '17 More »
Inflation 2.5% in '17, up from 2.1% in '16 More »
Business spending Rising 3%-4% in ’17, after flat ’16 More »
Energy Crude trading from $47.50 to $52.50 per barrel in August More »
Housing 5% price growth by end of '17 More »
Retail sales Growing 4.1% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

The spring rally in oil prices appears to be over. After climbing swiftly from $47 per barrel to $53 in recent weeks, benchmark West Texas Intermediate has pulled back to $49 on fears that global oil markets will remain oversupplied for longer than previously expected. Earlier this spring, traders appeared optimistic that OPEC’s plan to cut its oil exports would help shrink bloated stockpiles of crude held in storage around the world. But recent production data suggest that U.S. output will keep rising and offset OPEC’s production cut.

Data from the International Energy Agency show that stockpiles of oil held in storage throughout economically developed countries remain far higher than normal. In the United States, the world’s top oil consumer, stocks sit near their all-time high, according to the Department of Energy. Weekly DOE data also show that U.S. crude output is rising at a brisk clip. Current production of about 9.25 million barrels per day is up by 300,000 barrels from one year ago. And DOE projections show continued output increases from major U.S. shale oil fields, such as the Permian Basin in West Texas.

Via E-mail: Energy Alerts from Kiplinger

In short, oil supply remains too high relative to demand for prices to increase much. Some near-term spikes are possible this spring. But by late summer, we look for WTI to trade from the high $40s to low $50s per barrel: essentially unchanged from now.

Advertisement

Prices at the gas pump should keep grinding higher, even with oil prices sputtering. Chalk it up to strong seasonal demand from drivers hitting the road on vacation, coupled with the high cost of refining summer-blend gas. At $2.41 per gallon, the national average price of regular unleaded is up slightly from a week ago and will likely surpass $2.50 later this spring. Diesel, at $2.53 per gallon, will also bump up a few cents.

Natural gas prices continue to pull back, as expected. The benchmark gas futures contract was recently trading at $3.03 per million British thermal units (MMBtu), down a bit from a week ago. Warm weather means little demand for gas to heat homes. Meanwhile, gas production is showing signs of rising, and stockpiles of gas held in underground storage are already high for this time of year. We look for gas prices to retreat toward $2.75 per MMBtu by late spring.

Source: Department of Energy, Price Statistics