Low Oil Prices Translate To Low Gasoline Cost Equals Increased Holiday Spending

Crude oil declined Wednesday morning falling 43 cents to trade at 43.78 after a surprise climb in stocks as reported by the American Petroleum Institute after markets closed on Tuesday. The American Petroleum Institute reported that crude supplies jumped by 6.3 million barrels for the week ended Nov. 6, according to sources late Tuesday. A Platt’s survey of analysts forecasted an increase of 500,000 barrels. The official EIA inventory due on Wednesdays has been postponed until Thursday due to the Veteran’s Day holiday.

Investors remain a little jittery in the wake of another sign of weakness in the world’s second-largest economy and concerns around the potential impact of a rate hike in the US. The latest number out of China to draw the eye was a sharper-than-expected drop in inflation on Tuesday, with the news coming on the heels of Sunday’s soft trade data out of Beijing.  

It ramps up the pressure on the suite of numbers due out of the region today, including retail sales and industrial production, with a disappointment likely to lead to a sell-off. In the meantime, commodities continue to bear the brunt of the selling pressure, testing multi-year troughs as a result. Long-term oil market fundamentals remain robust but prolonged low prices could threaten security of supply and pave the way for a price spike, Saudi Arabia’s vice oil minister said on Monday. The Organization of the Petroleum Exporting Countries meets to review policy on Dec. 4. Two other OPEC officials on Monday made upbeat comments about the 2016 outlook, suggesting big changes are unlikely. Brent oil diverged from US oil and climbed 3 points to 47.88.

The International market has been engulfed into strong bearishness after seeing ongoing rise in crude production levels. Russians have not only produced in huge amount, but also has captured the market share, which the Saudi’s are trying to gain it back. Already in China, Russians have outperformed the Saudi’s for the second time. Seeing fading market share, the Saudi state oil has declared discount in their OSP to the European nations. Refiners seeing cheaper crude oil consume more crude oil but since products side demand has remained lull, their inventory levels are also seen rising.

The International Energy Agency says oil prices are likely to remain low over the next five years because of plentiful supply and falling demand in developed countries. The Paris-based body, which advises developed countries on energy policy, says it expects oil prices to return to $80 per barrel in 2020, with further increases after that.

The low price of WTI and imported oil continues to lower the price of gasoline at the pump in the US. Falling gas prices have put consumers in a good mood. The average price for regular gasoline stood at $2.21 a gallon on Tuesday, down from $2.927 a year ago, according to AAA. With consumers poised to pay the lowest holiday gas prices since 2008, according to AAA, Santa may just end up being a bit more generous this year.

More than one in four consumers, or 26%, expect to increase their spending this month—a 7-point jump over the past month and the highest percentage this year, according to the Consumer Fuels Survey released Tuesday by the National Association of Convenience Stores.