Gasoline futures are pointing toward the cheapest summer driving season since 2009, with wholesale prices projected to be near $1.75 per gallon. After taxes and other expenses are added in, the average driver could be paying around $2.35 per gallon, a far cry from the norm of $3.50 during the last three summers.
Gasoline prices are under pressure as US stockpiles of crude oil continue to swell, reaching 482 million barrels last week, an eighty-year high. As refineries attempt to soak up the excess crude, they're pumping out fuel, pushing gasoline inventories well above average.
Nonetheless, prices could rise into the summer if the crude oil supply glut reverses course. This could happen due to a reduction in US production, which seems likely as new projects are being slashed in the face of low prices.
Meanwhile, international events could restrict the global supply of crude, boosting prices. The most-watched issues right now are the deepening instability in the Middle East due to ISIS and a potential standoff with Iran over its nuclear expansion, which seems more likely after Iran's supreme leader indicated that he had issues with the agreement reached last week.
Lumber Hammered Lower
Lumber prices fell near a three-year low this week, trading under $267 per thousand board feet. Prices are under pressure as construction, a major source of demand for lumber, remains lackluster.
Although US new home construction is rising, it still is well below historical levels as US homebuying remain tepid. Meanwhile, economic slowdowns in China, Europe, and in oil-producing nations are hampering foreign demand, all of which contributed to lumber's 35% decline over the past two years.
Going forward, it may take a fundamental shift in the global economy to get prices to hoist higher.
Herd Mentality Drives Cattle Wild
Cattle futures started the week with a flurry, exploding higher Monday morning into three-month highs as traders outbid each other on fears of a beef supply shortage. Later in the day, the market turned abruptly lower as long-term bulls sold off their holdings, booking profits. By the end of the week, the selling had turned into a cascade, with April cattle falling to limit down, dropping the exchange maximum three cents per pound on Friday.
In the coming months, more beef is expected to hit the market, potentially pressuring prices lower than Friday's price of $1.59 per pound.