Updated at 1:32 pm EST
U.S. drivers may get some near-term relief on gas prices heading into the Juneteenth holiday weekend as crude prices plunged to a three-week low in mid-day Friday trading amid ongoing concerns for a global recession.
Data from the AAA motor club indicated that U.S. gas prices eased from this week's all-time high to a national average of around $5 per gallon for the first weekly decline in more than two months. Although small, the decline could portend bigger declines over the summer as oil prices slide in the face of uncertain demand, and a surging U.S. dollar, linked to the global economic slowdown.
Patrick De Haan of consumer advocate GasBuddy.com suggests today's decline in crude could take gas back to around $4.55 to $4.75 per gallon in the weeks ahead.
WTI crude futures for July delivery, the most tightly-linked commodity to U.S gasoline prices, were marked $7.53 lower on the session at $110.06 per barrel.
Brent crude contracts for August delivery, the global pricing benchmark, fell $6.53 to change hands at $113.17 per barrel and on pace for its biggest weekly decline in five.
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The pace of U.S factory growth fell sharply in May, data indicated Friday, although overall industrial output edged 0.2% higher and capacity levels improved. Still, retail sales data earlier this week indicated that American consumers are diverting more of their extra cash to cover the record surge in gas prices and are pulling back on discretionary spending.
The stand-alone sales of gasoline surged 4% last month, the Commerce Department said, as prices hit consistent record highs of nearly $5 per gallon for much of the month. Retail trade at gas stations, the data suggested, was up 43.2% from the same period last year.
The University of Michigan's benchmark consumer sentiment survey hit an all-time low last week, and data from the Atlanta Fed's GDPNow forecasting tool suggests the economy has stopped growing over the second quarter and could tip into recession before the end of the year.
Others, however, warn that dwindling global supplies, as well as the impact of Russia's war on Ukraine, will likely keep near-term crude prices elevated.
Energy Department data earlier this week noted that stockpiles at the U.S. Strategic Petroleum Reserve fell to the lowest levels since January of 1987 last week, while overall domestic inventories fell by a weekly record of 7.7 million barrels to just over 511 million barrels.
"The current level of market tightness driven by supply issues is simply too big of a factor to ignore," said Saxo Bank's chief commodity strategic Ole Hansen. "As a result, we are seeing low availability of fuels into the peak summer demand season."
"Sanctions against Russia and other multiple disruptions have led to the OPEC+ group trailing its own production target by more than 2.5 million barrels per day," he added. "The risk of even tighter markets was highlighted by the International Energy Agency in their monthly update when it said that world oil supply will struggle to meet demand in 2023."