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After oil prices rose on anticipation of an Israeli airstrike on Iran, market fears of supply disruptions in the oil-rich Middle East are giving way to relief that Israel’s attack over the weekend did not target Iran’s oil export terminals or nuclear facilities. Once it became clear that the strikes, which hit targets such as Iranian missile construction facilities, were not going to lead to an immediate Iranian reprisal, oil prices started crashing. Benchmark West Texas Intermediate tumbled about 5% on the first trading day after the airstrikes, trading at about $68 per barrel. Unless the situation in the Middle East worsens again, we look for WTI to stay near the $70 level this fall.
Retail gas prices will be following oil lower. The national average price of regular unleaded, now at $3.13 per gallon, could dip below $3 for the first time since May 2021, according to Department of Energy data. With Thanksgiving about a month away, the millions of Americans who will be taking to the road to visit family and friends over the holiday weekend will probably feel thankful for cheaper fill-ups. Diesel, now averaging $3.57 per gallon, is almost unchanged from a month ago. But it should also start trending lower as the drop in oil prices works through to refiners and ultimately to fuel stations.
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Natural gas prices rallied earlier this fall as stockpiles of gas in underground storage started to come into alignment with their historical averages, after a big glut had emerged earlier in the year. However, the return of warm weather across much of the country to end October and into the beginning of November has put the brakes on that rally, with benchmark gas futures contracts recently trading at $2.31 per million British thermal units. Not long ago, gas futures were nearing $3 per MMBtu. They could regain that level if some sustained cold weather enters the forecast and points to stronger heating demand. But for now, the balmy autumn temperatures are going to weigh on natural gas prices.
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