Gas Prices, Energy Futures, Fall
(07-24) 12:45 PDT NEW YORK, (AP) —
Gas prices extended their slide at the pump overnight, and oil and gasoline futures posted big declines Tuesday on a growing view that demand for gasoline is ebbing and inventories are growing.
A perception that oil prices have been driven higher by speculation and not by supply-and-demand concerns also led some investors to lock in profits, analysts said.
The average retail national price of a gallon of gas fell 1.2 cents overnight to $2.956, according to AAA and the Oil Price Information Service. Retail prices peaked at $3.227 a gallon in late May.
Retail prices typically lag the futures market, and gasoline futures have fallen more than 31 cents a gallon over the last two weeks. In Tuesday trading on the New York Mercantile Exchange, gas futures for August delivery dropped an additional 5.64 cents to settle at $2.0477 a gallon.
The tumble in gasoline futures helped drag light, sweet crude for September delivery down $1.33 to settle at $73.56 a barrel on the Nymex.
September Brent crude dropped $1.78 to settle at $75.08 a barrel on the ICE Futures exchange in London.
Nymex heating oil futures lost 2.52 cents to settle at $2.0309 a gallon. Natural gas futures dropped 17.6 cents to settle at $5.863 per 1,000 cubic feet. Natural gas prices have been pressured in recent days by forecasts for cooler weather and expectations that inventories will grow to record levels next month.
Oil refineries have boosted production in recent weeks, leading investors to a view that gasoline supplies would indeed be enough to meet demand. Gas and oil prices rallied this spring and early summer on concerns that an unusual number of refinery outages would prevent the industry from producing enough gas this summer.
Refinery utilization increased in last week’s inventory report from the Energy Department’s Energy Information Administration, and investors are betting it will grow again in Wednesday’s report.
Analysts surveyed by Dow Jones Newswires on average predict gasoline inventories grew by 510,000 barrels last week as refinery utilization grew 0.8 percentage points to 91.8 percent.
The growing refinery runs likely drew crude oil inventories down by 1.1 million barrels. Distillates, which include heating oil and diesel, are forecast to have grown by 730,000 barrels.
While investors believe gasoline inventories are growing now, they also realize that refiners are already looking ahead to the fall, when demand for gasoline drops and refiners can make and sell less expensive “winter grade” gasoline, said Michael Lynch, president of Strategic Energy and Economic Research Inc., in Winchester, Mass.
Refiners plan out a month in advance when trying to decide how much oil to buy and which products to process it into, Lynch explained.
“The driving season is almost over, as far as refineries are concerned,” Lynch said.
Oil investors are also selling to lock in profits, Lynch said. Many analysts believe record levels of speculation in oil futures have driven prices to artificial highs, he said.
“I think they realize that they’ve distorted the market, and people are pulling out,” Lynch said.
Oil prices have also been pressured this week by comments from several OPEC officials that seemed to indicate the Organization of Petroleum Exporting Countries might be open to boosting output after months of steadfastly arguing that no production increases were necessary.
“That represents a change from ‘no way,’ to ‘maybe,’” wrote Peter Beutel, president of U.S. energy risk management firm Cameron Hanover, in a research note. “It was the first time this year that OPEC has shown any willingness towards flexibility.”
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Associated Press Writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.
