Gas prices could rise for long weekend and into summer amid fires, economic worries

TORONTO –

Experts say shifting components together with wildfires in Alberta, a slowing financial system and potential pressures on provide will all impact fuel costs because the lengthy weekend heralds the beginning of the summer season.

“This weekend is the kickoff for summer driving season in Canada,” mentioned Colin Cieszynski, chief market strategist at SIA Wealth Management.

This interval is normally characterised by greater demand for fuel as individuals go on extra street journeys and take their bikes and sports activities carts out of hibernation, he mentioned.

“It’s not unusual to see gas prices go up and down around weekends, and especially long weekends.”

However, the worth of crude has been drifting for some time, mentioned Cieszynski, with considerations over demand whereas the financial system muddles alongside within the face of upper rates of interest.

“It boils down to a question of supply and demand,” mentioned Roger McKnight, chief petroleum analyst at En-Pro International.

“It’s also a question of inflation and recession and how that’s intimidating demand,” he mentioned.

On the provision facet, there are some pressures, mentioned McKnight, with U.S. inventories down, particularly for heating oil, jet gasoline, and diesel gasoline.

Demand for every type of fuel, in the meantime, is up — particularly for jet gasoline, he mentioned, indicating a lot of curiosity in travelling exterior the nation.

“We have a situation here where supply is tight, and falling, demand is up and rising,” mentioned McKnight.

That means costs will seemingly be greater for the following couple of months, maybe cresting US$80, he mentioned.

Anecdotally, costs on the pump have gone up forward of the lengthy weekend, mentioned Brianne Gardner, senior wealth supervisor of Velocity Investment Partners at Raymond James Ltd.

Prices typically soar up on large news, such because the fires presently ravaging elements of Alberta and forcing oil and fuel firms to close in manufacturing, mentioned Gardner. The identical factor occurred in 2016 with Fort McMurray, although the present quantity of oil being curtailed per day is considerably lower than it was throughout that catastrophe, she mentioned.

Canadian crude usually trades at a reduction to West Texas Intermediate, however the hole is the tightest it has been shortly as a result of fires, Gardner mentioned.

Though greater costs from the present fires will seemingly be a shorter time period impact, the longer the fires and manufacturing shutdowns go on, the longer elevated costs would final, Gardner mentioned. She famous that that is just the start of a season typically characterised by wildfires, that means additional disruptions could possibly be forward.

Recent news that the U.S. authorities plans to refill the Strategic Petroleum Reserve is sweet in the long term, however will drive inventories decrease within the shorter time period and ship greater costs on the pump, mentioned McKnight.

But Cieszynski thinks the federal government will not be in a rush to refill the strategic reserve if costs begin to rise an excessive amount of.

“I don’t think they would want to refill the strategic reserve at the cost of running up the price of oil,” he mentioned.

The OPEC oil cartel will proceed to be a consider costs as effectively, as Saudi Arabia wants oil to be round US$80 a barrel, mentioned McKnight.

Much was made about an anticipated rise in demand for oil from China as its financial system reopened following strict COVID-19 measures, however that enhance by no means occurred.

But consultants say that does not imply it could not nonetheless play a job within the coming months.

If demand from China does bounce again, Cieszynski mentioned that may be the “number one factor” that may drive up fuel costs. But in any other case, he would not foresee large swings coming.

“It just seems like for the moment, unless there’s some kind of surprise, or some kind of external event like China’s economy takes off, you’re just kind of sitting in this range,” he mentioned.

“There are a lot of moving parts” impacting fuel costs within the coming months, mentioned Gardner. With provide pressures, the ground of the vary oil has been buying and selling in — round US$70 — appears set, however the ceiling of that vary has but to be decided, she mentioned.

Despite worries a couple of potential recession because the financial system slows, client demand has been robust, mentioned Gardner.

This report by The Canadian Press was first printed May 19, 2023.