The price on the August contract for light crude dropped to $56.90 today before settling at $57.26. The EIA report issued today showed unexpected increases in U.S. crude inventories as well as gasoline and distillates.
The price of crude dropped 94 cents on the day after dropping over $2 the day before. Brent crude also dropped a dollar to settle at $56. Gasoline also dropped 4 cents a gallon coming at $1.58. Heating dropped a penny to $1.60 a gallon.
Rises in inventories were unexpected as crude stocks rose 1.1 million barrels for the week and were up 23.6 million over a year ago to 328.5 million barrels. Gasoline stocks were up 300,000 barrels to 216.2 million, up 11.1 million barrels for the year. Distillates were up 1.7 million barrels to 113.2 million or 2.3 million barrels for the year.
Right now the oil market is stretched tight so these increases were welcome by many industry watchers. With OPEC pumping at capacity, U.S. demand higher than its ever been, and Chinese demand coming swiftly up behind the U.S., bullish traders charged through the markets and have been driving prices up for weeks. Monday, the price of oil hit nearly $61 a barrel, setting a new record after oil had climbed continuously last week.
The downside to the report was consumer prices continue to rise for both gasoline and diesel fuel. Average gasoline prices hit $2.22 a gallon up a nickel from the previous week and 29.4 cents for the year. Diesel fuel pricing hit $2.33 a gallon, up 2.3 cents or 64 cents for the year. It remains to be seen what the retail prices will do following the inventory numbers this week.
Even though many of these numbers seem promising, the bulls may still be sharpening their horns as the July 4th weekend approaches in the U.S. This holiday is one of the high points for gas consumption during the summer and will signal a rough midpoint until the Labor Day weekend.
Also, natural disasters always play a part, particularly with supply so thin. As hurricane season moves in traders fear problems in the Gulf of Mexico after last years onslaught of hurricanes that did some major damage to offshore platforms. Then, of course, there are always terrorist problems in many African and Middle-eastern countries.
Refiners are pulling their weight right now too. They run at near capacity and they increase incrementally this week. Also on the refinery front, Bloombergs reported Saudi Aramco and Royal/Dutch Shell is considering a plan to double their refinery in Port Arthur, Texas. This expansion would push their capacity up to 600,000 barrels a day and would be the highest increase in 25 years.
The price of crude dropped 94 cents on the day after dropping over $2 the day before. Brent crude also dropped a dollar to settle at $56. Gasoline also dropped 4 cents a gallon coming at $1.58. Heating dropped a penny to $1.60 a gallon.
John Stith is a staff writer for murdok covering technology and business.
