August contract crude dropped more than two dollars a barrel on reports that Hurricane Emily will completely avoid oil fields. Gasoline and heating oil, taking a hint also plummeted. These are lowest prices in over two weeks for oil.
Light sweet crude on NYMEX opened at $59.80 this morning and throughout the day, dropped steadily, at one point going to $57.25 a barrel before rising back to $57.80. Prices in London slid 50 cents to $57.77 a barrel.
Heating oil, opening at $1.71 slid headlong into $1.66 a barrel and gasoline dropped 6 cents to $1.69 a gallon. These prices come from no hurricane damage for now and the International Energy Agency’s announcement that world wide oil growth is slowing more than anticipated.
The EIA announced in their weekly report yesterday that crude inventories dropped, mostly because of slowed production from tropical storm Cindy and some evacuation from hurricane Dennis. Fortunately, while production did go off line for several days, no real damage was done to offshore oil rigs and production has resumed. The other big surprise was once again in distillate production.
Refineries continue to push their limits running at 98% capacity to bring distillate levels up. Most industry watchers expected an increase just under 2 million barrels. They were all surprised for the third week in a row when distillates increased 3.2 million and is up 3.7 million for the year at 120.4 million barrels.
Gasoline levels dropped a fairly substantial 2.7 million barrels to 212.6 million but are still up 6.7 million barrels for the year. Crude oil overall dropped 3.9 million barrels to 321 million total and still up a significant 18.1 million barrels for the year.
The report also said retail fuel prices continue to climb as well. Retail prices for gasoline hit $2.32 a gallon, up over a dime from the last week and 41 cents for the year. Diesel hit $2.40 a gallon, up 6 cents from last week and 67 cents for the year.
Unfortunately, the forecast for petroleum future is more of the same. Many events can alter the prices of crude dramatically as a simple weather report showed today. With more political instability in the Middle East and economic growth uncertain for many countries, oil prices will remain volatile. As the U.S. moves headlong into what might be a long and difficult hurricane season prices could quite possible rise to $70 a barrel as few other places offer any increases in production.
One can’t help but wonder though what adding the million barrels a day from the Caspian pipeline as well as stabilizing and putting into production the Thunder Horse fields in the Gulf will do to the price and for that matter, a more secure Iraqi oil infrastructure.
John Stith is a staff writer for Murdok covering technology and business.
