Gas dips below $2.50 for first time in 2 months
The average retail price for gasoline dipped below $2.50 a gallon for the first time in two months Monday as swelling oil supplies and slumping demand overshadowed even a fire at a major U.S. refinery.
Friday’s fire at a Tesoro refinery in Los Angeles, which processes roughly 100,000 barrels of crude oil a day into gasoline, jet fuel and other products, will likely lead to some higher pump prices in California, but the effect is muted elsewhere, said analyst and trader Stephen Schork.
Gasoline demand is so weak that even “a material disruption to supply to one of the largest markets in the world barely registered with the speculators on the NYMEX,” Schork wrote.
The average price for a gallon of regular gasoline fell a half a penny overnight to $2.499, according to auto club AAA, Wright Express and Oil Price Information Service. That’s 11 cents less than a month ago, and nearly $1.16 below what drivers were paying at this time last year.
Still, energy prices for the most part rebounded to start the week on the New York Mercantile Exchange, particularly crude, which hit a two-month low on Thursday.
Benchmark crude for November delivery rose 82 cents $1.43 to $66.84 a barrel.
Wholesale gasoline for October delivery on the New York Mercantile Exchange rose 2.63 cents to $1.6468 a gallon.
A couple of factors this week are helping to support futures prices, even though the government reported Wednesday that oil supplies increased by millions of barrels in the prior week.
An oil spill in the Houston Ship Channel over the weekend closed off a portion of the heavily trafficked canal, but Coast Guard officials say operations were minimally impacted.
More relevant were events oversees.
Crude prices last week had tumbled 8 percent in two days and appeared ready to fall further before world leaders at the Group of 20 summit issued a stern warning to Iran over a previously unknown nuclear facility. About 20 percent of the world’s crude is carted through the Straits of Hormuz on Iran’s southern coast and any showdown between the West and Iran could threaten that route.
But PFGBest analyst Phil Flynn said oil producers waiting in line ready to pick up that extra slack.
“Saudi Arabia has enough spare production capacity to replace Iran’s exports two times over,” Flynn wrote.
That would explain why there hasn’t been a substantial increase in prices. Last year, before the extent of the recession was known, any potential conflict in the Middle East sent prices
Natural gas prices continue to fall. Most trading has already moved onto the November contract, with the October contract expiring Monday. Prices for November delivery fell 12.5 cents to $4.823 per 1,000 cubic feet because some key storage facilities are nearing capacity.
In the U.S., the most closely watched economic indicator this week will be the Labor Department’s monthly jobs report on Friday. Investors will also get reports on home prices, manufacturing, consumer confidence, construction spending and factory orders.
In other Nymex trading, heating oil gained 3.4 cents to $1.7113 a gallon, and natural gas fell 21.5 cents to $3.77 per 1,000 cubic feet.
In London, Brent crude rose 98 cents to $66.09 on the ICE Futures exchange.
Associated Press Writers Pablo Gorondi in Budapest, Hungary, and Alex Kennedy in Singapore contributed to this report.
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