Gasoline Futures Point to Pricey Fill-Ups

Reformulated gasoline blend-stock (RBOB) futures on the New York Mercantile Exchange this week hit a fresh seven-month high of $1.8315 a gallon, basis the July futures contract, as a three-month uptrend in prices continues. The Nymex gasoline futures price is a wholesale price. Consumers are paying significantly higher retail prices at the pump.

The Memorial Day weekend typically kicks off the start of a three-month "peak demand" period of higher gasoline consumption as Americans hit the highways for summertime activities, including vacations. However, gasoline demand this driving season is expected to be down a bit, amid the worst U.S. economic downturn since the Great Depression of the 1930s.

The U.S. Energy Information Administration Wednesday posted a second weekly decline in the nation's crude stockpiles. However, inventories remained at their highest levels since 1990. U.S. gasoline stocks have dropped below the five-year average level, according to the EIA. Gasoline demand was down 1.2% from a year earlier, said the EIA.

July Unleaded Gasoline Futures FutureSource.com and TradingEducation.com

From a technical perspective, the next major upside chart objective for the gasoline futures market is major psychological resistance at $2 a gallon. The present price uptrend suggests that gasoline futures prices will challenge the $2 mark in the coming weeks. However, a push in prices below solid technical support at the $1.5500 level would produce some serious chart damage to suggest that a market top in gasoline is in place.

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Jim Wyckoff is a senior market analyst for TradingEducation.com a free educational Web site. In addition, Wyckoff writes a blog offering current market commentaries every morning on TraderBlogs.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Wyckoff appreciates your feedback; click here to send him an email.