U.S. gasoline prices poised to drop below $3/gallon ahead of election, analysts say

Crude oil futures finished a roller-coaster week with modest gains, as U.S. offshore production shut-in by Hurricane Francine offset longer-term concerns about demand prospects highlighted by OPEC, the EIA and the Paris-based IEA, which all lowered their demand estimates this week.

U.S. government data showed the storm had shut-in 732K bbl/day, or 42% of Gulf of Mexico output, but said Friday that production from undamaged facilities would be brought back immediately.

“These cuts are expected to prove brief and within the broader context are unlikely to spur much movement in the crude balances given the importance of shale production that accounts for the major portion of U.S. output,” Ritterbusch said, according to Dow Jones.

Traders “could come back Monday and everything is fine, the refineries are running at 100%, everyone is back on the platform, oil comes back and gasoline is coming out of the refinery – and the market could potentially pull back exponentially,” Mizuho’s Robert Yawger said, Reuters reported.

Front-month Nymex crude (CL1:COM) for October delivery finished Friday -0.4% to $68.65/bbl, and front-month November Brent (CO1:COM) closed Friday -0.5% to $71.61/bbl; for the week, WTI was up 1.4% and Brent ended 0.7% higher.

Also, RBOB gasoline futures (XB1:COM) edged up this week after four straight losing weeks, with the front-month Nymex October contract gaining 1.8% to $1.9302/gal.

ETFs: (USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI)

Analysts say U.S. motorists may see gasoline prices fall below $3/gal for the first time in more than three years as soon as next month, shortly before the November election.

The national average price for regular gasoline was $3.23/gal on Friday, down $0.21 from a month ago and $0.62 from a year ago, according to data from AAA.

The average should break below $3/gal by late October and perhaps sooner, with summer driving season over and retailers starting to sell cheaper winter-grade fuel in the coming weeks, GasBuddy.com’s Patrick De Haan said, as reported by Reuters.

Studies by the Wells Fargo Investment Institute show U.S. presidential approval ratings are inversely tied to gasoline prices, so according to the theory, falling prices should help Democrats in this election cycle.

Energy (NYSEARCA:XLE) was the week’s only negative performer among the 11 S&P sectors, with the Energy Select Sector SPDR Fund ETF finishing -0.5%.

Top 20 gainers in energy and natural resources in the past 5 days: Nano Nuclear Energy (NNE) +117.5%, Nuscale Power (SMR) +38.7%, Coeur Mining (CDE) +37.9%, Gatos Silver (GATO) +34.3%, New Gold (NGD) +33%, First Majestic Silver (AG) +32.4%, Endeavour Silver (EXK) +29.4%, Silvercrest Metals (SILV) +28.9%, Eos Energy Enterprises (EOSE) +25.8%, Hecla Mining (HL) +25.1%, MAG Silver (MAG) +23.6%, ASP Isotopes (ASPI) +23%, NovaGold Resources (NG) +22.5%, Enovix (ENVX) +22%, Mesabi Trust (MSB) +21.4%, SSR Mining (SSRM) +21.2%, Silvercorp Metals (SVM) +21.2%, Equinox Gold (EQX) +21.1%, Aris Mining (ARMN) +20.2%, Solaris Resources (SLSR) +19.7%.

Top 5 decliners in energy and natural resources in the past 5 days: KLX Energy Services (KLXE) -19.4%, Methanex (MEOH) -11.1%, Green Plains (GPRE) -9%, NET Power (NPWR) -8.3%, Gran Tierra Energy (GTE) -7.7%.

Source: Barchart.com