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$100 Oil No Cause for Panic

Stocks in this article: BP APA EOG CHK TPLM SUG APC


NEW YORK ( TheStreet) -- U.S. oil prices were falling on fears of economic collapse in Europe Thursday, but remained above the psychologically important $100 level.

But there's no need for consumers to panic right now, according to energy analysts. West Texas Intermediate, or WTI, crude prices are merely playing catch-up with global oil, such as the European Brent benchmark -- and gasoline prices have been following Brent prices for almost the entire year. So have heating oil and jet fuel prices.

"In terms of headline movements, products are following Brent, not WTI, so the move in WTI in the last few days should really be a moot point," says Matt Smith, commodity analyst at Schneider Electric's Summit Energy.

"So far, not any worry," said Cameron Hanover energy analyst Peter Beutel. "Yesterday, it was just WTI returning to its proper place in relation to Brent," he agreed.

"Except for refineries in the main U.S. oil storage hub Cushing, Okla., which have been making a fortune, refineries along the coast have been paying prices in line with Brent for their crude oil," said SEB analyst Filip Petersson.

January WTI futures were falling $1.47 to $101.13 a barrel and the February Brent contract was behind by $1.51 at $110.

As WTI oil prices shot past $100 a barrel Wednesday, New York Mercantile Exchange (NYMEX) oil trader Dan Dicker reassured panicking consumers.

They are "gritting their teeth in horror as WTI oil prices seem to be going straight up," he said. However, "gasoline, heating oil and jet fuel prices are moving down, not up."

Indeed, the national average price of gasoline has been at $3.41 a gallon, which is notably less than the average price at the pump of $3.50 to $3.90 from Feb. to March of this year, according to a GasBuddy.com report. This, as Brent crude prices cooled slightly over the last three months and refinery utilization and gasoline production increased.

Gasoline futures are at their lowest level since Feb. and that's facilitating the seasonal decline for wholesale and retail prices, the GasBuddy.com report said.

Analysts are now paying close attention to Brent prices to clue in on where gasoline, as well as heating oil and jet fuel prices might be heading. SEB is playing it conservative. "While we still acknowledge an upside risk to our forecasts, we maintain a conservative stance due to lacklustre 2012 Organisation for Economic Co-operation and Development growth forecasts and uncertainty regarding China's exit strategy," says Petersson.

SEB analysts have raised their average fourth quarter Brent price forecast by $5 a barrel to $115 a barrel; their 2012 forecast by $4 a barrel to $114 a barrel; and their 2013 forecast by $5 a barrel to $120 a barrel on factors such as higher geopolitical risk relating to the resurfacing of Iranian nuclear issues, less likelihood of a U.S. recession, the upcoming heating season and a tightening long-term market supply-demand outlook.

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