Welcome to CrushTheStreet.com’s Weekly Market Wrapup!
Our top story of the week is pain at the pump: amidst the backdrop of geopolitical tensions and volatile inventory levels from Middle Eastern producers, the price of oil continues to rise well ahead of the summer driving season. The index for West Texas Intermediate, or light crude oil, is up over 10% when compared to late May of prior year and this trend has had a pronounced affect on street prices, where the national average jumped from 3.53 in late March to around 3.70 a month later.
According to an article run by USA Today, most energy observers forecasted that consumption in the United States would fall below last year’s rate due to a structural decline in demand, a theory that was based on an assumed supply increase, as well as competition from non-traditional production sources such as shale-gas or fracking.
However, consumer demand has remained stubbornly high, with most residents in California paying well over four dollars a gallon for gas, forcing the International Energy Agency to state that OPEC will need to increase production to combat higher prices throughout the globe.
So are we doomed to suffer ever more exorbitant rates as the traditional vacation season looms upon us? Historically, prices tend to rise during the summer due to the higher production costs associated with “summer-blend” fuel, a directive mandated by the Environmental Protection Agency to help reduce pollution.
Source Article: No pain at the pump: Why it may cost less to gas up this summer
But according to Patrick DeHaan, senior petroleum analyst at GasBuddy.com, stated that refinery maintenance costs necessary to perform the summer-blend switch is mostly absorbed in the late winter to early spring, and that by June, the worst of the structural costs are behind us.
Then there is the technical argument: Since the beginning of March, the price action on West Texas has formed a “triple-top” pattern, with each successive peak demonstrating an inability for oil bulls to push prices to new highs. This may suggest a capitulation in the markets, with traders likely to pull out in the short-term.
Over the long-term, the circumstances are still tricky: Libya and Iraq are not up to previously established standards regarding oil production, and any number of geopolitical hotspots could erupt, sending volatile shockwaves to the market. Also, hurricane season is a big unknown, with any affect on the Gulf Coast virtually guaranteed to drive prices north.
Finally, let’s take a look at the closing numbers, with the major indices putting up a muted performance. The S&P 500 added one quarter of a percent of valuation, while the Dow Jones ended virtually unchanged against the prior. The NASDAQ led the group, gaining half a percent.
For the metals complex, gold closed at $1,295 while silver added 10 cents to finish the session at $19.59. Palladium continues its dramatic run based on supply concerns, closing at a multi-year record at $839. On the digital front, bitcoin initiated a substantial recovery, blowing through a resistance barrier at $450 to close at $520.
And that will do it for this edition. Thanks for watching and we’ll see you next week!