It’s difficult to know where you’re going if you’re sleep walking.

The Wall Street traders must feel like zombies right now as they try to determine what path to take when forecasting crude prices. That’s because there isn’t a clear or safe direction to take.

The flavour of the month price range today has West Texas Intermediate (WTI) in the range of $72 to $82/bbl. It’s hard to put a handle on any forecast when futuristic numbers are a guess as to where global economies are headed, and how, or even if, they can get there.

There are some questions that must first be asked and answered:

1. Is the global economy slowing down?

2. Are interest rates reaching a plateau?

3. Are consumers ready to venture out and spend again, or is inflation the new pandemic, which will send us all back into hiding?

When we look at the latest Energy Information Administration (EIA) report we can see levels of crude continue to increase for some reason, and they are now 9% above the five-year average. However, gasoline inventories are 5% below the average, but this may be because refineries are only running at 85% capacity.

There are signals that prices may begin to increase as we tiptoe our way out of winter and see demand for gasoline go on the upswing. The same holds true for the distillate family of products, and this could be a problem if the economy continues to turn the corner because diesel levels are 10% below the 5-year average.

Remember, diesel is the driver and conductor of our economic train.

Better stay awake and buy a ticket now because it may get expensive.

– Roger McKnight – B.Sc., Senior Petroleum Analyst

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