Publications: Notes at the Margin

Sanctions Surprise: Collapsing Gasoline Prices Pull Crude Down (November 5, 2018)


"Iran Sanctions Kick In, Bringing Biggest Oil Disruption in Years" screamed a headline on Bloomberg Thursday. In the article, one of the analysts speaking of the price effect warned, "A large part of the impact has not happened yet." He added, "Price-wise there's still some upward pressure to come, possibly a big wave of upward pressure. Things are going to tighten up."


Such views have been echoed in forecasts issued by various investment banks. The Wall Street Journal surveyed eleven banks and reported that they expected Brent crude to average $75 per barrel for the year and WTI $68. To realize the $75 Brent forecast, the crude would need to average $85 for the rest of 2018. To achieve its $68 forecast, WTI would need to average $72 for the remainder of this year.


Friday, Dated Brent settled for $71, $14 below the $85 average required to achieve the forecast discussed in The Wall Street Journal. WTI settled for $63, $9 below the $71 average needed to reach the projection for 2018. The problem, of course, is gasoline. For the last month, gasoline prices have dragged crude prices down.


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