Fuel Flash – June 2023

In early May, oil prices fell from the mid-$70s/barrel, even dipping below $70 for a few days. Demand fears continue to weigh heavily on the market after the recent banking crisis, as well as the Chinese economy likely falling short of expectations. The following graph shows the daily price movements over the past three months:

As we moved further into May, oil prices started to build upward momentum, but a surprise build in inventories cut gains short. With Memorial Day here, usually demand in the U.S. increases and causes gas prices to rise. Analysts believe that will not be the case this year with oil prices staying low.

The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

Diesel prices continued their slide in May, with both wholesale and retail prices extending their decline through 2023. Retail margins were just a tick above last month and remain high. For gas, wholesale and retail prices declined as well. Gas margins were up compared to last month, due to wholesale falling quicker than retail did. The following graph shows the retail margins over the trailing 15 months:

Crack spreads have sustained their level near $1 throughout 2023. We have been waiting for a decline compared to 2022, but it has not happened yet.

According to AAA, the national average gas prices finally saw a decline in May, albeit small. Gas prices declined by roughly $0.03 to $3.58/gallon compared to last month. The national average diesel price continued its decrease by about $0.16/gallon to $3.95/gallon.

Oil prices finished May at their lowest marks seen since December 2021. Fears of slowing global economies (such as China) and the U.S. Fed trying to slash inflation, have caused oil prices to plummet at the end of May. OPEC is set to meet early in June and there is a lot of uncertainty on how they will handle oil prices sliding. A gambling person might bet on them slashing production to try and stop the bleeding.

Sokolis Group anticipates that oil prices will hover in the $65-75/barrel range for the near future. We will do our best to keep you updated with the latest news.