Analyst: Crude Oil Will Fall to the Upper $20 Range Soon
But gas prices are headed higher at the same time, with national averages about to rise above $2 a gallon.
Crude oil futures took another beating on Thursday, after a government report revealed that crude inventories had risen for the seventh consecutive week, and one crude oil analyst believes that it will dip below $30 within the next few days.
Crude oil for March delivery fell $1.97, or 5.5 percent, to $33.97 a barrel at the close of floor trading on the New York Mercantile Exchange.
“I think crude oil will visit a new bottom next week as [the] March [contract] expires,” Tom Kloza, Chief Oil Analyst at the Oil Price Information Service, told Consumer Energy Report. “I wouldn’t be surprised to see $29-31 per barrel for a day or less.”
Oil is down 24 percent this year and 63 percent from a year ago.
“Crude oil futures are a bit disconnected from reality,” said Kloza. “It was abstractly and surrealistically high at $147 a barrel last July, and it is surrealistically low now and at say $30 per barrel.”
Crude oil stockpiles at Cushing, Oklahoma—the world’s biggest storage hub and the delivery point for U.S. crude futures—rose last week to record levels around 35 million barrels, near operational capacity.
Despite production cuts by the Organization of the Petroleum Exporting Countries (OPEC), the global economic recession is taking its toll on energy consumption and crude oil supplies appear to be outpacing demand.
Recently, Iraq’s oil minister commented that OPEC would be making additional production cuts when it meets again in March.
Venezuela has also made statements to that effect and has even announced a price target of $100 per barrel which they are seeking to achieve.
The International Energy Agency yesterday reduced its global oil demand forecast for the current year, projecting that consumption will decline by 1 million barrels per day, the biggest drop since 1982.
At the same time, gas prices are swinging in the opposite direction as crude oil.
“Gasoline at the refinery ‘gate’ is too high relative to crude. I wouldn’t be surprised to see retail gasoline prices crest in the first quarter of 2009 - March perhaps,” Kloza said.
He believes that we’ll be in a range of $2.00-$2.50 a gallon nationally at that time, with the highest prices on the West Coast.
“$2.00 gal will be less the exception and more the rule by next Friday,” he said.
According to AAA’s daily fuel gauge report, the national average for a gallon of unleaded gasoline is $1.952 – up more than 15 cents in the past month.