Analyst: Gas prices may jump around in December, fall again in January

December 16th, 2008 at 05:29pm Thomas V. Bona

I asked Tom Kloza, chief oil analyst with the Oil Price Information Service, what to make of the rebound in gas prices today. Here are his thoughts:

We broke the streak of consecutive days lower, and we may see an irregular jog (north & south) for the remainder of December. January will almost certainly bring another test of recent lows - it’s the time of the year when a lot of winter gasoline is around, and that gasoline has to be sold before the transition on pipelines and terminals is made to lower vapor pressure spring gasoline.

I’ve described it before as a bit of an enema for the gasoline distribution business. There will probably be firesales on winter gasoline and prices will retest recent multi-year lows. After the firesales, prices will tend to rise into Spring and Summer.

I think the $1.25 gal level or so that we saw for some Midwestern markets earlier this month may get tested again, but I don’t see the case for $1.00 gal or lower prices (as some folks have been predicting).

First 40 days of 2009 will be a rugged environment for oil, and particularly for gasoline. The next 100 days after that almost certainly sees an uptick.

Meanwhile, it looks like OPEC will cut production by 2 million barrels a day, which some analysts have said isn’t enough to move prices up. OPEC’s goal is apparently to get oil up to $70 a barrel, but anticipation of the cuts couldn’t even get oil back above $50 today.

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