Gas prices could pick up in summer from refinery pressures

CIBC Private Wealth US Senior Energy Trader Rebecca Babin joins Yahoo Finance's Market Domination to talk about the price pressures in the energy market stemming from OPEC's extended production cuts for oil (CL=F, BZ=F) and its spillover into gas prices (RB=F) ahead of the summer season.

"Over the course of the summer, we're going to see a lift in gas prices, probably closer to that kind of $3.65, $3.70 level. Nowhere near the point where it starts to make people change their mind on consumption," Babin states. "But I would expect we see a bottoming here, and throughout the course of the summer we see a little incremental rise as demand picks up..."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

Video transcript

Rebecca also add this up, you know, what, what does this all mean for gas prices?

Rebecca, what, what do you see there in terms, you know, just near to intermediate term?

So gas prices, that's a good, good question because right now we're finding margins have been exceptionally weak in Asia and the United States and it's helped really keep gas prices contained.

We're at like 357 I think at, at an average here in the United States.

I actually think over the course of the summer, we're gonna see a lift in gas prices probably closer to that kind of 3 65 3 70 level, nowhere near the point where it starts to make people change their mind on consumption.

But I would expect we see a bottoming here.

And throughout the course of this summer, we see a little incremental rise as demand picks up and the Refiners are able to kind of pick up a little bit more margin.

These are very compressed levels and I, I just don't think it's sustainable throughout the peak of summer driving season.

I mean, the other interesting thing about all of this Rebecca is that we you know, we were, at one point during the year we were talking about concerns over oil prices being a feed into inflation even though yes, we know the fed doesn't watch oil specifically.

But what if it, you know, sort of became, um, less transitory, so to speak, if, uh, companies sort of factored that into their cost, that doesn't seem to be a risk at this point.

I don't think it's a risk the way it was.

But I think ultimately, when we talk about how it feeds through into the rest of the economy, it's also not when we're seeing this pullback.

I don't think it's being considered like this tailwind for the economy yet, we're not at a point where prices have pulled back.

We're wow, energy prices are so low, it's really going to help the rest of the economy.

So we're kind of in this no man's land.

I think there's more fear of what will happen if it starts to go higher.

Um, in, in terms of what it will do to growth, then there is the benefit of it continuing to go lower.

So I think the focus is always how much damage will it do to the economy if it rises as, as opposed to?

Wow, there's going to be a big tailwind if, if those costs start to come down.

And I think part of that is just embedded in this, this inflation that has been rampant across the broader economy, not just in energy.

So I think that's, that, that fear of inflation is still there and I don't think that's going to go away until inflation broadly is more contained and there's still going to be a focus on energy inflation and there's going to be fear around it.