Shannon Stapleton /Reuters
RBOB gasoline rose 4.88% to $1.3652 a gallon on Wednesday, one day after President Donald Trump compared falling gas prices to a tax cut.
“Do you think it’s just luck that gas prices are so low, and falling?” Trump tweeted on New Year’s Day. “Low gas prices are like another Tax Cut!”
RBOB prices have fallen nearly 40% in three months amid a supply glut and similar sell-off in crude oil. West Texas Intermediate crude oil was trading at about $47 a barrel on Wednesday, up over 3%.
The rallies in RBOB gasoline and crude oil were catalyzed by traders betting that the OPEC cartel of oil producers would announce larger production cuts than originally anticipated, said Bob Iaccino, the chief market strategist at the Chicago-based Path Trading Partners.
“You can see it a little bit in the drop in Saudi exports,” he told Business Insider. “The market knows that an OPEC promise and what OPEC delivers have traditionally been two different things.”
Phil Streible, a senior market strategist at RJO Futures, a Chicago-based commodity futures brokerage, said investors could see prices rise from here.
“We could see a surge in gas prices with unseasonably warm weather predicted in January and lack of snow which is encouraging people to drive more,” Streible told Business Insider in an email.
“Also, OPEC cuts, prospects of the Fed being done with raising interest rates and a recovery in crude oil prices are all helping lift futures.”
Meanwhile, the latest GasBuddy fuel outlook released Wednesday projects that 2019 US gasoline prices on average will be $0.03 lower than last year’s at $2.70 a gallon. Still, GasBuddy says the national retail average could jump to a “possible peak in May” to over $3 before falling into year-end.
Upside catalysts would be production cuts from OPEC and a strengthening domestic economy; an economic slowdown could weigh on prices.
Others say a severe drop in oil prices has overstated fears around global growth.
“Oil today is playing out the narrative of the correlation between stocks and oil,” Jeff Kilburg, the CEO of KKM Financial, told Business Insider, adding that he expected a retest of of above $50 a barrel in January.
“And moreover, who is leading who,” he said. “Global growth expectations have been reeled in but, the drop in oil from $70 to $40 over exaggerated the lowered expectations of global growth.”
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