Crude oil prices rose for the first weekly increase on Friday, while gasoline prices also reflected their upward movement.
The possibility that OPEC+ could agree to cut production levels at its Oct. 5 meeting supported prices for Brent, the international benchmark, and WTI, the US benchmark.
Rise in gasoline prices
Gasoline prices rose slightly this week as some refiners struggled with various issues.
Gasoline prices rose an average of 6 cents from a week ago to $3.73 a gallon, said Patrick De Haan, head of petroleum analysis at GasBuddy, a Boston-based provider. information and data on retail fuel prices.
Prices rose further in California, where prices climbed 50 cents to 75 cents per gallon from last week.
“We will continue to see the average slowly increasing, but relief could come in a few weeks,” he said. “I don’t know if I’ve ever seen a wider range of price behavior from coast to coast in my career.”
The massive destruction from Hurricane Ian caused outages at gas stations as power remains cut off for 2 million residents. Linemen face flooding, high winds, and falling trees and power lines when carrying out repairs.
Florida Power & Light, which is owned by NextEra Energy (BORN) said it was able to restore power to more than 800,000 storm-affected customers, but ‘anticipates some customers will face extended outages as parts of Southwest Florida’s power system will need to be rebuilt rather than repaired”.
The utility company said damaged areas were assessed using drone technology. FP&L planned to use its fixed-wing drone to determine the extent of the damage on Florida’s west coast.
The number of gas station outages in Florida jumped to 15% of stations overnight, while just 0.4% of stations in South Carolina were down. Most of the outages occurred in the Fort Myers/Naples areas, surpassing Tampa for outages, De Haan said.
Refinery disruptions, including fires and routine maintenance, occurred for a short time, driving up wholesale gas prices and “contributing to wild swings as regions of the West Coast, Pacific Northwest, Great Lakes and Plains experienced significant refining issues leading to supply issues, causing prices to spike even as oil prices fell,” DeHaan said.
Gasoline prices along the West Coast and among the Great Lakes and Plains states could see further spikes of 25 cents to 75 cents per gallon or more until refinery issues are resolved.
Prices rose $2.50 per gallon in San Francisco, $1.90 in the Pacific Northwest with weaker gains of 70 cents per gallon in Chicago, followed by an increase of 35 cents per gallon in the Plains region. Prices in New York and the Gulf Coast regions are stable.
Normal activity is occurring at refineries across the Northeast and Gulf Coast, causing gasoline prices to decline or stagnate.
“The disconnect between the regions is growing and will likely remain abnormal over the next few weeks until the refinery issues are brought under control and corrected,” he said.
Bullish outlook for oil prices
The US dollar fell from its 20-year highs earlier in the week, which could be a positive move for crude oil since its contracts are based on the greenback. A stronger dollar leads to additional costs for buyers who own other currencies and generally reduces demand for oil.
Oil demand will remain constrained as China pursues its zero covid policy through next summer, wrote Damien Courvalin, managing director and head of energy research and senior commodities strategist at Goldman Sachs.
Supply from Russia will decrease towards the end of the year when the EU embargo begins with the end of globally coordinated SPR release.
“Based on these updated views, we still expect a seasonally adjusted global oil market deficit in 4Q22 and 2023, taking into account the constructions necessary for demand growth and the redirection of Russian oil,” he said. he writes. “While it is difficult to pretend to be optimistic on oil in the face of a historically large rally in the dollar and the dawn of a possible global recession, we believe that the oil market has already priced in a significant slowdown in growth. economic.”
While the amount of demand will be lower, Goldman remains optimistic on crude oil prices even though its forecast for 2023 has been lowered by an average of $17.5 per barrel.
“Based on our updated assumptions, it would take a hard landing in the economy to justify a sustained decline in prices,” Courvalin said. “While we recognize that the short-term price path is likely to remain volatile, with the USD in command (opposite), we find that our belief in the long-term bullish view is only reinforced by the current disappointments in the market. ‘global supply.’