Gasoline Back at Summertime Highs

Trouble in the Ukraine could cause spike in global oil prices.

By Brian Milne, Energy Editor for Schneider Electric.

Amid an ascending wedge formation on the spot continuation chart for the gasoline futures contract on the New York Mercantile Exchange, Reformulated Blendstock for Oxygenate Blending futures have closed above $3 gallon each session since April 9, and is in position to overtake the $3.1095 gallon high from August 2013.

Taking out that high sets the upside objective at the $3.1632 gallon high from July 2013 followed by the 2013 high at $3.2672 established in March. The current landscape, with crude costs for refiners under pressure from growing U.S. oil production, should mitigate a run-up to the 2013 high. The summer highs from 2013 look to be tested before the end of the second quarter however, likely early May.

There are several caveats, including the increasingly tense situation in Ukraine that could unravel into further bloodshed and draw Russia and Western powers towards a more dynamic collision course that spikes global oil prices. Russia, it should be noted, is also involved in diplomatic efforts in Syria’s civil war regarding Syria’s use of chemical weapons and their destruction, and in negotiations with Iran over the country’s development of a nuclear capacity.

Brent crude futures, which trade on the ICE Futures platform, are trading near seven-week highs at $110 bbl.

Absent worsening geopolitics and the premium it adds to global oil prices, we should expect to see the RBOB futures contract top out in May and then level off. If realized, the forecast would continue to push retail prices higher, with the Energy Information Administration’s US average price for regular grade having so far increased 10 weeks straight through Apr. 14 to a $3.651 gallon nine-month high. It’s the highest the retail average has been since July 22, 2013.

About the author

Brian L. Milne is the Energy Editor for Schneider Electric—a global specialist in energy management. Milne has been focused on the energy industry for 18 years as an analyst, journalist and editor. He can be reached at brian.milne@telventdtn.com.

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