Relief at the Pump on the Way

Gasoline prices are finally coming down, dropping over 25 cents per gallon since the beginning of October. American refineries had been running near full capacity for months, converting crude oil into fuel at a record rate.

As a result, U.S. gasoline inventories are at a record high for this time of year, nearly 10% above the five-year average. Meanwhile, U.S. fuel demand is flat, a sign that supplies could continue to rise.

Global oil prices are falling as well, dropping over $8 per barrel during the last three weeks, driven lower by stock market turmoil and concerns that the trade wars could slow global economic activity.

These declines came despite increasing tensions with Saudi Arabia, the world’s largest oil exporter. The Middle Eastern kingdom is embroiled in controversy surrounding the disappearance of a Saudi-born journalist, Jamal Khashoggi.

The Saudi regime has been accused of murdering the dissident journalist, who had been living in the United States, and prompting calls for sanctions against Saudi Arabia in response.

Currently, President Trump is calling for a full report on the disappearance, but has also cited Saudi Arabia’s importance as a military ally and trade partner, leading many to expect that any U.S. response will be muted, with little impact on oil prices.

**Coffee Market Boils Over

Coffee prices are finally perking up after hitting a 13-year low last month near 95 cents per pound. Since then, prices exploded 30% as declining stockpiles at the Intercontinental Exchange and a spike in domestic prices in major producing nations like Brazil and Vietnam fueled the rally.

Due to the recent low prices, global production is slowing, and demand is increasing. Projecting that combination forward, the world could end up in a supply crunch in the coming years. This is resulting in future prices far higher than the current market; futures markets for immediate delivery were worth $1.23 per pound on Friday, but are projected to be more than 10% higher a year from now.

Unfortunately, unlike commodities like metals or crude oil, coffee is only marginally storable, as beans can lose quality over time. As a result, it is hard to stockpile the currently cheaper coffee, leaving your favorite blend at the whim of the annual harvest and weather cycles.