Gas Prices Heading Up

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Kiplinger's latest forecast on the direction of energy prices


GDP 2.9% pace in '18, up from 2.2% in '17 More »
Jobs Unemployment rate down to 3.8% by end '18 More »
Interest rates 10-year T-notes at 3.0% by end '18 More »
Inflation 2.5% in '18, up from 2.1% in '17 More »
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Energy Crude trading from $55 to $60 per barrel in April More »
Housing Existing-home sales up 1.0%, new-home sales up 7.5% in '18 More »
Retail sales Growing 4.7% in '18 (excluding gas) More »
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Here come higher gasoline prices. The national average for regular unleaded rose four cents from a week ago to hit $2.53 per gallon — up almost a dime from a month ago. Odds are good that motorists soon will see still higher prices, with a national average of $2.60 a good bet. Diesel is also on the rise. At $2.93 per gallon, it’s up two cents from a week ago and looks likely to hit $3 per gallon this winter.

Blame the crude oil rally for elevated pump prices. Benchmark West Texas Intermediate crude recently traded at $64 per barrel, up from $61 last week and near a multiyear high. OPEC is meeting strong global demand with limited supply as the oil cartel continues holding down its collective exports. That’s a good recipe for spiking prices in the near term.

Via E-mail: Energy Alerts from Kiplinger

But we think the oil rally is becoming overextended. Crude prices have risen about 40% since late summer. Energy companies are starting to put more drilling rigs to work in the U.S. in response. And there are signs that they are locking in today’s prices through financial hedges, suggesting that they’ll be pumping more crude soon. Eventually, that supply boost should curb today’s rally. We look for WTI to trade between $55 and $60 per barrel in April — down moderately from now.

Natural gas prices got a brief lift from recent extreme cold, but are already declining. At $3.14 per million British thermal units (MMBtu), the benchmark gas futures contract is up a bit from the roughly $3 per MMBtu it has been trading at. But considering that early January saw the biggest depletion in gas stockpiles since the Energy Department started tracking them, that’s not much of a bump. Barring another cold spell that forces large chunks of the country to dip deeply into natural gas reserves, we look for the price to settle around $3 again.

Source: Department of Energy, Price Statistics