Oil Price Rally Takes a Breather

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Kiplinger’s latest forecast on the direction of energy prices

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Drivers continue to get a bit of relief at the gas pump. The national average price of regular unleaded gasoline is down about three cents from a week ago, to $2.53 per gallon. Prices had been steadily climbing earlier this winter as the result of rising crude oil prices, but that trend reversed a couple of weeks ago. Odds are, the national average will hover around $2.50 per gallon in the coming weeks before starting to rise again as spring nears. Diesel, now averaging $2.96 per gallon, is down two pennies from last week and will probably hold fairly steady in the near term.

Oil prices remain volatile but are no longer in rally mode. Benchmark West Texas Intermediate crude is relatively unchanged from a week ago at about $61.50 per barrel. That’s down from the recent peak of about $66. But WTI has been moving in short dips and spikes in recent trading and is likely to keep bouncing around. The strengthening global economy should push prices higher, but U.S. oil production is currently rising so fast that it might offset the extra demand caused by stronger economic growth. We look for WTI to trade from $55 to $60 per barrel in April as U.S. energy firms keep bringing more barrels to market.

Via E-mail: Energy Alerts from Kiplinger

Warm weather across the eastern U.S. is keeping downward pressure on natural gas prices. The benchmark gas futures contract was recently trading at $2.66 per million British thermal units (MMBtu), which is down by about 10% from where it traded for most of the winter. Gas stockpiles are smaller than normal for this time of year, but without seasonably cold weather in the heavily populated Northeast, heating demand will be too anemic to support prices. If the mild trend continues, look for gas to stay below $2.75 per MMBtu. But if a late cold snap hits, a trading level of $3 is a good bet.

Source: Department of Energy, Price Statistics