Falling Oil Prices May Offer Relief
Oil prices fell for a second day Thursday, hitting their lowest point in almost three months and boosting hopes that motorists will get some relief at the gas pump this summer.
Light sweet crude for June delivery slid $1.91, or 3.8%, to $48.54 in New York Mercantile Exchange trading -- its lowest level since Feb. 18. It brought the benchmark contract’s two-day loss to almost 7% as investors reacted to news of rising supplies and slowing global demand.
Gasoline futures, meanwhile, fell 5 cents to $1.432 a gallon on the Nymex, the lowest since March 1.
The drop in crude prices also touched off a broad decline in shares of oil companies and refiners. Exxon Mobil Corp. fell $2.47 to $54.82 and Chevron Corp. lost $1.35 to $52.05, both in New York Stock Exchange trading. An index of oil company stocks fell 3.6%, with all 11 members losing ground. Valero Energy Corp., the largest independent refiner, tumbled $5.17, or almost 8%, to $62.03 on the NYSE.
Oil hit an all-time high of $57.27 on April 1 but has fallen steadily since then as members of the Organization of the Petroleum Exporting Countries increased production and China’s once seemingly runaway economic growth moderated a bit.
The Energy Department reported Wednesday that U.S. crude stockpiles rose for the 12th week out of the last 13, hitting their highest levels since July 1999. And the International Energy Agency said China’s demand for oil rose 4.5% in the first quarter -- about one-fourth of its year-ago level.
“The market is convincing itself that not only are [oil] inventories in good shape, but that suppliers won’t be so challenged over the peak travel season to meet demand because of predictions of global economic slowdown,” said Mark Baxter, director of Maguire Energy Institute at Southern Methodist University in Dallas.
The recent slide in oil has prompted many analysts to trim their outlook for gasoline prices this summer, with forecasts calling for unleaded regular to hover in the $2.05- to $2.10-a-gallon range nationwide this summer. Prices in Southern California are expected to fall to the neighborhood of $2.30 to $2.35.
There’s hope for even lower prices in the region.
The wholesale price for California blend gasoline on the spot market Thursday was $1.58 a gallon, down 53 cents from a high of $2.03 on April 4, said Tom Kloza, chief oil analyst for New Jersey-based Oil Price Information Service.
He said retail prices in California tend to track about 65 cents a gallon above the spot price, which points to about $2.25 per gallon at the pump if spot prices hold.
Softening oil prices already have begun affecting prices at the pump. Nationwide, the average retail price for regular was $2.175 a gallon Thursday, according to AAA. That’s a 10-cent drop from the April 11 record high of $2.276, but remains almost 15 cents above the year-ago average of $1.93.
In the Los Angeles-Long Beach region, the average price for a gallon of regular was $2.566, down from $2.630 a month ago, according to the auto club. California prices are higher in part because the state requires an expensive clean-burning blend.
