JPMorgan Chase (NYSE: JPM) Analysts Chime in on Gas Prices

As the summer travel season is nearly upon us, consumers are worried about the prospects of rising gasoline prices. With speculators expecting further volatility in the middle east, many fear gas prices will continue to inch higher and have a severe impact on disposable person income.

This uncertainty may be coupled with fundamental issues as well. Analysts JPMorgan Chase & Co. (NYSE: JPM) observed that Gasoline markets are “well supported” after power outages in the Gulf Coast disrupted refinery operations, curbing production amid lower-than-expected inventory levels for the fuel.

Analysts led by New York-based Lawrence Eagles seem to agree with this position as well, stating today in a note to clients that “European refiners still returning to service” and stock levels there at the lowest level this year are also supporting gasoline over the short term. The Energy Department reported yesterday that gasoline stockpiles declined for a tenth consecutive week, dropping 2.51 million barrels to 205.6 million barrels. The falling supply coupled with summer demand may provide a recipe for disaster.

Eagles wrote “Unsurprisingly, gasoline values have soared on the back of these developments, with gasoline futures now more heavily backwardated between the front and sixth month contracts since than any time since June 2007.”

Russia banning gasoline exports in May is another bullish factor, the analysts wrote. Russia exported 83,000 barrels a day of gasoline in January, the most recent data available on the Joint Oil Data Initiative website showed. Further complicating the issue with gas prices is the fact that refineries with almost 5 percent of U.S. fuel-making capacity were knocked offline after power failures in Texas City, Texas, starting April 25, sending gasoline futures to a 33-month high in New York.

Gasoline for May delivery rose 4.49 cents, or 1.3 percent, to $3.4643 a gallon at 11:30 a.m. on the New York Mercantile Exchange. The premium of the May contract over October increased to 36.33 cents a gallon from 34 cents yesterday. Commodities Analysts across the Street at firms like JPMorgan Chase and Goldman Sachs (NYSE: GS) will provide key insight into the oil market in the near term.

Speculators may continue to push up prices, and coupling that with the fundamental issues of restricted supply and rising demand consumers may be in for a rude awakening. Although this time of year will avert the impact of rising home heating oil prices on holiday sales, the price at the pump will surely have many knock on impacts, and could hurt retailer and entertainment profits during the second and third quarters.