Oil prices started dropping this morning in early electronic trading on the New York Mercantile Exchange. This happens on the heels of a meeting this week between President Bush and Saudi Crown Prince Abdullah and right before the U.S. releases its energy reports for the week.
Light sweet crude was trading down 27 cents to $53.93 this morning and Brent crude was down 19 cents to $53.95. Gasoline was also down one cent a gallon in early trading.
A recent story run by the Associate Press suggests markets have begun to calm after the reassuring words of the Saudis.
“After the reassuring words of the Saudis, general market sentiment has cooled and markets calmed down a fair bit on the U.S. gasoline situation,” said Deborah White, an analyst with SG Securities in Paris.
Barring an unforeseen drop in United States gasoline stocks, prices are expected to continue falling over the next couple of weeks, she said.
“We will not see the US$50.00 threshold tested, however,” White added.
Oil inventories are expected to rise slightly after last weeks decline. Gasoline inventories may decline but this is expected, particularly since refineries have been a source of problem for the volatile fuel industry.
A number of refineries have seen down time for unscheduled maintenance issue and ConocoPhillips is down again this week with maintenance problems. OPEC has suggested these refinery issues are one of the big reasons gas prices are so high right now.
Earlier this month, OPEC said that inventories for crude are certainly high enough for the market but oil gets bottlenecked at refineries in countries with large consumption rates.
President Bush suggested this week that defunct military bases be turned into oil refineries but this would be a long-term answer instead of a short-term fix.
The U.S. hasn’t seen a new oil refinery in over 30 years.
John Stith is a staff writer for Murdok covering technology and business.
