With crude oil trading above $110 per barrel and Memorial Day on the horizon, gasoline futures should be poised for take off. But with inventory at a 17-year high and demand dropping for the first time in 17 years, gasoline has failed to keep pace with crude.
“The market is not moving around very much,” says Joe Marshall, analyst for PitGuru. “We are in a trading range, and we are in a very high trading range. So not only is it expensive to trade, you are not getting a bang for your dollar.” In May he says the low is $2.65 per gallon and could go higher than $3.
“The backwardation in the futures spreads are not strengthening,” observes Darin Newsom, analyst for DTN, meaning commercial buying has yet to step in. He says support is at $2.4875 and resistance is at $3.05.
In a major economic downturn, gas futures could drop to $2.40, says Darren Dohme, trader at Powerline Petroleum. But he says Fed actions and global demand will keep crude demand up, and gasoline prices will firm. Support is $2.60, resistance is $3. “Crude might run as high as $125, plus a $10 crack spread is $135, divided by 42 gallons per barrel, and that would give you $3.20 unleaded gasoline futures. That’s my maximum high-side target,” he says.
