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Economic Forecasts

Oil Market to Remain Jumpy

Kiplinger's latest forecast on the direction of energy prices

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GDP 2.9% pace in ’18, up from 2.2% in ’17 More »
Jobs Unemployment rate will decline further More »
Interest rates 10-year T-notes at 3.2% by end ’18 More »
Inflation 2.5% in ’18, up from 2.1% in ’17 More »
Business spending Up 7% in ’18, boosted by expanded tax breaks More »
Energy Crude trading from $65 to $70 per barrel in December More »
Housing Price growth: 5.0% by end of ’18 More »
Retail sales Growing 5.1% in ’18 (excluding gas and autos) More »
Trade deficit Widening 5%-6% in ’18 More »

Oil prices pulled back last week amid the big tumble in stock markets. Benchmark West Texas Intermediate crude fell from $75 per barrel to under $72. But where the oil market goes next remains up in the air.

A possible clash between the United States and Saudi Arabia — over accusations that the Saudi government murdered a journalist in Turkey — has already prompted hints that Riyadh may push oil prices higher by curbing the country’s prodigious exports. The return of sanctions on Iran’s oil industry also raises supply concerns. On the other hand, the global economy isn’t looking as robust as it was earlier this year, meaning that global oil demand could also defy expectations.

Via E-mail: Energy Alerts from Kiplinger

In the short run, we expect the market to remain quite volatile, with prices swinging sharply in response to changing headlines. In the longer run, we look for WTI to trade from $65 to $70 per barrel in December.

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Gasoline prices should finally edge lower after their recent upward march, much to the relief of drivers. The national average price of regular unleaded fell two cents last week to reach $2.89 per gallon. If crude oil prices don’t rally again, the pain at the pump should gradually ease. Diesel, now averaging $3.30 per gallon, is up a couple of pennies from last week and will probably climb a bit more because of mounting demand for chemically similar heating oil.

Natural gas prices are holding their recent gains. The benchmark gas futures contract was recently trading at $3.26 per million British thermal units (MMBtu) after gas futures spent most of the summer below $3. Colder weather seems to have arrived in earnest across much of the United States, which means more demand for gas to keep homes and other buildings warm. If the weather stays chilly, we look for gas to trade near $3.25 per MMBtu or a bit higher.

Source: Department of Energy, Price Statistics