US Gas Station Prices 'Warning Light'...Fear of International Oil Prices Reaching $125 Spreads

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As the price spread between near-month international crude oil futures widened significantly again, warnings grew louder that US gasoline prices could rise further.

According to MarketWatch on September 14 (local time), the average price of gasoline at US gas stations is recording $4.32 per gallon. The gap with the all-time high of $5.02 recorded in June 2022 has also narrowed. Although there is a time lag until the rise in international oil prices is reflected in retail gasoline prices, the price of crude oil for immediate delivery is rising faster than for future deliveries, indicating the possibility of further increases.

Brent crude November futures rose to $109.8 per barrel during trading on the 14th, then fell back to around $105.3. December futures were at $100.54, widening the price difference between the two contracts to approximately $5.58. This is the largest gap since July 23. West Texas Intermediate (WTI) October futures also exceeded $103 per barrel, and the price difference with next month's delivery expanded to approximately $4.79, heading towards its highest level in about two months.

The source of supply instability is the Middle East. Saudi Arabia's key East-West crude oil pipeline was shut down after multiple drone attacks. Tensions also escalated around the Bab el-Mandeb Strait as Iran-backed forces seized the port of Mocha and strategic islands in the Red Sea. Stephen Innes, Managing Partner at SPI Asset Management, analyzed that a prolonged shutdown of the pipeline could lead to logistical constraints and an actual reduction in crude oil production. Regarding the widening price spread for near-month futures, he said, “It means that buyers are increasingly paying higher prices for crude oil that they can secure now.”

Adam Turnquist, Senior Technical Strategist at LPL Financial, noted that there has been “almost no progress” in resolving the conflict surrounding Iran. As Brent crude surpassed its summer high of around $100 per barrel last week, the next major resistance zone was presented as $112-$125. He assessed, “A significant number of conditions pointing to the risk of further oil price increases have been met.” The Middle East conflict has already been ongoing for seven months.

Oil price instability has also spread to financial markets. The yield on the US 10-year Treasury note exceeded 5% during trading, reaching its highest level since July 2007. The Dow Jones Industrial Average fell 0.3%, the S&P 500 index fell 0.5%, and the Nasdaq Composite index fell 0.6%. As tensions over spot crude oil supply prolong, energy prices and financial markets are simultaneously reflecting risks originating from the Middle East.

[Article Key Summary]

-The average US gasoline price rose to $4.32 per gallon, narrowing the gap with the all-time high of $5.02 in June 2022.

-The price difference between Brent crude November and December futures widened to $5.58, marking the largest level since July 23.

-LPL Financial suggested $112-$125 per barrel as the next major resistance zone for Brent crude.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*