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Economic Forecasts

Oil Prices Tank Despite OPEC Cuts

Kiplinger's latest forecast on the direction of energy prices

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GDP 2.1% growth in ’17, following 1.6% in ’16 More »
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Interest rates 10-year T-notes at 3% by end '17 More »
Inflation 2.5% in '17, up from 2.1% in '16 More »
Business spending Rising 3%-4% in ’17, after flat ’16 More »
Energy Crude oil trading from $55 to $60 per barrel in May More »
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Retail sales Growing 4.2% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Oil prices remain under downward pressure, with benchmark West Texas Intermediate crude recently trading at a hair under $48 per barrel, little changed from a week ago and about $5 lower than where it has held for much of 2017. Traders remain concerned that there is simply too much crude flooding the global market, even after OPEC lowered its output to curb excess supply. Department of Energy data show that U.S. oil output is rising week by week, a trend that could offset OPEC’s cuts and prevent the inventory glut from clearing.

We look for oil to rebound modestly later this spring, when refineries get back to full operation after slowing down for seasonal maintenance. As refineries ramp up, they’ll buy significantly more crude and help whittle down inventories. Figure on WTI trading between $55 and $60 per barrel by the end of May.

Via E-mail: Energy Alerts from Kiplinger

Prices at the pump continue to tread water. The national average price of regular unleaded gasoline is barely changed from a week ago at $2.29 per gallon. Expect gas prices to dip a tad lower in the near future before starting to rise later in the spring. The summer-blend gas that refineries are required to make when warm weather arrives is costlier to produce than winter formulations. And demand figures to pick up as Americans start hitting the road for vacations around Memorial Day. Diesel, now averaging $2.50 per gallon, fell a penny from a week ago and is likely to remain fairly stable in coming weeks.

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Natural gas prices are probably about as high as they’re going to be for a while. At $3.09 per million British thermal units, the benchmark gas futures contract has rallied from a late-winter swoon. But gas demand is likely to fall sharply across much of the country, now that spring weather is taking hold. We look for gas prices to retreat toward $2.75 per MMBtu as spring progresses.

Source: Department of Energy, Price Statistics