U.S. consumers in the last year or so have been whipsawed by the price of oil. Having seen crude oil prices surge to more than $147 a barrel in July 2008, prices tumbled steadily right into the new year, only to resume a steady climb on investor speculation that the world economy was heading out of recession. After falling to around $30 a barrel last winter, U.S. crude oil prices more than doubled to about $70 a barrel by June.
In recent weeks, however, prices have once again begun to fall as investors reassess whether the economy is indeed on the rebound. On Friday, the price of a barrel of sweet crude, the kind favored by the United States, rose slightly to $66.20. But for the week, crude prices retrenched more than eight percent, the biggest weekly loss in more than two months.
With all that volatility, consumers likely are wondering where oil prices are heading next, especially with predictions of a cold, snowy winter in some parts of the country. First the bad news: a bitter cold winter would likely result in higher home heating-oil prices than those at current levels, but nothing on the order seen last year, according to Daron Bertillion, an analyst with Mobius Risk Group, a Houston-based commodity and energy advisory firm.
Still, he said, ample supplies of crude oil worldwide, and especially in the United States, will likely damp any sudden increase in crude-oil prices at the retail level. U.S. crude oil supplies are running 13 percent above last year's levels, while distillates, which include diesel fuel and home heating oil, have inventories 25 percent to 30 percent above fall 2008 levels. When it comes to gasoline, Bertillion said, U.S. stock piles are 8 percent to 10 percent higher than a year ago.
On Tuesday, data from the American Petroleum Institute showed a sharp rise in crude oil inventories, rising 2.855 million barrels in the week ending Sept. 18 and countering analyst expectations of a decrease in inventories.
High crude inventories and excess capacity will likely mute any bull run in crude prices in the next few months, Bertillion said, meaning there's little likelihood that consumers will soon see $4-a-gallon gasoline.
Also weighing on oil prices is the recent run-up in stock prices. Blue-chip stocks have gained nearly 25 percent in value since late March, when the Dow Jones industrial average hovered around 7,500. On Friday, the Dow closed at 9,665.19. That climb will likely lead some investors to do some profit taking, which likely will have the effect of keeping oil prices in check, he said.
In coming weeks, crude oil prices could tumble another $7 to $10 dollars a barrel to as low as $56 a barrel, Bertillion said. That will likely result in lower prices for gasoline, diesel fuel and home-heating oil in the next few months.
Take the first steps to building your portfolio.View Course »