When Crude Will Peak... And Fall

[Inside Money Morning] When Crude Will Peak... And Fall By Matthew Carr, Chief Trend Strategist Dear Reader, The giant sombrero was always our salvation... South of the Border. The roadside attraction in Hamer, South Carolina meant we were halfway there if we were traveling to Florida. Or at the very least it meant we could escape the high-speed prison of the car for a few smoke-free moments. Growing up, travel by plane was a luxury we rarely enjoyed. We sped across the country in a catalog of old beaters along veins and arteries of interstates. My father was at the helm, a Benson & Hedges dangling from his lip and a cup of coffee (one cream, no sugars) sitting in his lap. We raced from sea to shining sea, from the northern border to the south, and every Roswell and South of the Border in between by car. And not just once... multiple times. The passenger side foot was well piled up with crushed metallic green and gold cigarette packs and stained Styrofoam cups. There were no smartphones or portable video games to entertain us. We had only the classics... the License Plate Game... Punch Bug... Mad Libs. The adventures offered fleeting moments of excitement and beauty encased in hours of soul-crushing boredom. It was glorious. But this trip down memory isn't about nostalgia. It's an important reminder for investors that a $358 billion splurge kicks off today. And it has a significant impact on one of our most vital resources. But there's a secret I'm going to show you - that few investors know - that you can use to make smarter investing decisions for the months ahead... That way, at least you won't be stressing about your portfolio on the family road trip. The Memorial Day Catalyst It's official, summer travel season is here! This weekend, 42.3 million Americans will hit the road. That's a 7% increase over last year. And it will mark the third busiest Memorial Day travel weekend in the last two decades. Keep in mind, despite the average price of gasoline hovering above $3.57 per gallon - which is down from more than $4 in 2022 - Memorial Day road trips are still below pre-pandemic levels. But here's what most investors don't realize... the preparation for summer travel seasons requires months of build-up, particularly from U.S. refiners. This directly impacts the ebbs and flows of U.S. crude prices. Remember, my core philosophy as a tactical trend investor is that all assets move in waves. And when I started out in oil & natural gas in my 20s, compiling pricing reports for all the export, import, and trading hubs across the U.S., was when this concept really solidified. Crude gains in price from south to north as it flows along the spider web of pipelines from the main hubs in the Gulf Coast and Cushing, Oklahoma. The further oil, or a refined product like gasoline, must travel along this highway to reach its destination, the more expensive it gets. We can clearly see this in the average price per gallon of gas in the U.S. Average Price per Gallon of Gasoline Source: AAA All the states with the cheapest gas are closest to the point of origin - the Gulf Coast - and the refining hubs in Texas and Louisiana. This is something most consumers or investors never realize. But that's not the only secret I'm going to share with you. You see, refineries are major consumers of oil. And they have a predictable pattern to their demand, which helps us pinpoint when oil prices will peak... as well as fall. A Hill and a Sombrero I've been covering crude and gasoline markets for decades. And I'm going to show you two charts that will change the way you think about U.S. oil. The first is the average monthly price for a barrel of U.S. crude from 1986 to today... U.S. Average Price Per Barrel Crude, 1986 to 2023 Source: EIA/Matthew Carr It's a parabola. A nice rolling hill. We typically see oil increase in price from January to a peak in July before fading in the second half of the year. And over the last 37 years, the average gain in the price of a barrel of crude from January to July is 8.95%. Meanwhile, crude prices have averaged a loss of 1.37% from July to December. Your parents didn't pile you and your siblings into the car in January or February... those road trips took place over the summer. So, that summer peak in oil makes sense. But here's the other part of the equation: U.S. refinery utilization rates. All those barrels of oil need to be converted into gasoline, diesel, and jet fuel. And below is the chart of the average monthly U.S. refinery utilization rate... U.S. Average Refinery Utilization Source: EIA/Matthew Carr It looks like a cowboy hat or a sombrero. This chart is essentially showing the level refineries are operating at each month. The higher the utilization rate, the more raw materials, such as oil, those refineries are consuming. This sombrero pattern repeats year after year for a very fundamental reason. Those two dips I've circled in red are refinery maintenance seasons. They happen at the same time each year - one in spring and the other in fall. And as we approach those points, U.S. refineries begin unwinding the levels they're running at. That's because refineries must briefly shut down and clean before producing summer-grade fuel (spring) and winter-grade fuel (fall). The gasoline you buy in November and December is not the same gasoline you buy in May or June. U.S. refineries run at their highest capacity in June, July, and August. That happens to be the peak of the summer travel season. But here's a rule of thumb most don't know... Every 1% in refinery utilization represents roughly 100,000 barrels per day (bpd) in crude oil demand. When a commodity is in high demand, prices soar. And when that demand wanes, prices fall. U.S. oil often hits a peak for the year in June or July - when consumer and commercial demand is at their apex. All assets move in waves, commodities more than most. Many of us spent countless summer hours as kids traveling to and back from vacations. Little did you know then that years later you could use those experiences - even the salvation of the South of the Border sombrero - as the basis for investing. Don't let those memories fade. Use them to your portfolio's advantage and prepare for the seasonal peak and the resulting collapse in crude. Your tactical trend hunter, Matthew P.S. I'm excited to announce I'll be speaking at the [Power of Passive Income Virtual Expo]( that runs from June 6-7 on MoneyShow's virtual platform for accredited investors. I'll share my latest views on recent market activity and the road ahead - as well as specific, actionable steps you can take to maximize profits and minimize risk. I will also be joined by dozens of other top analysts, money managers, strategists, authors, and professional traders, all of whom are eager to share real-time analysis, advice, and strategies with you. Plus, you'll have the chance to ask questions directly to me and the other experts, not to mention fellow investors and traders from around the world. And you can visit interactive virtual booths featuring message boards, timely research, educational videos, exclusive discounts, prize drawings, and more! Simply [SIGN UP FREE HERE](... then join me online when the event kicks off. You are receiving this e-mail at {EMAIL}, as part of your subscription to Inside Money Morning. To remove your email from this list, [unsubscribe here](. Please do not reply to this email as this address is not monitored. 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