NEW YORK (AP) _ Gas prices dropped a cent at the pump overnight, following a futures market that has plunged more than 25 cents a gallon over five days on news of growing inventories and refineries returning
Tuesday, July 17th 2007, 12:27 pm
By: News On 6
NEW YORK (AP) _ Gas prices dropped a cent at the pump overnight, following a futures market that has plunged more than 25 cents a gallon over five days on news of growing inventories and refineries returning to service.
Oil prices slid lower after rising above $75 earlier on concerns about disruptions in supplies of the light, sweet crude that is most in demand by those refineries as they ramp up their operations to produce more gasoline. Analysts have been mystified by the different directions oil and gasoline futures have taken over the past several Nymex sessions, predicting that one contract was bound to follow the lead of the other at some point.
The national average price of a gallon of gas dropped a cent overnight to $3.04, according to AAA and the Oil Price Information Service. It was the second straight decline after gas had risen a dime over 10 days amid Midwestern refinery problems. Gas prices peaked at $3.227 a gallon in late May.
In the gasoline futures market, word that several refineries were returning to service and last week's government report of rising inventories has sent prices plummeting in recent days. Retail prices typically lag the futures market.
Gasoline for August added to those losses Tuesday, falling 4.07 cents to $2.0855 on the New York Mercantile Exchange after rising more than 3 cents a gallon earlier.
Light, sweet crude for August delivery fell 36 cents to $73.79 a barrel on the Nymex. The last time a front-month contract closed over $75 was Aug. 9.
September Brent crude lost 92 cents to $75.37 a barrel on the ICE Futures exchange in London.
Heating oil futures fell 1.79 cents to $2.0377 a gallon, while natural gas prices fell 9.1 cents to $6.285 per 1,000 cubic feet.
In recent sessions, while gasoline futures fell sharply, oil continued setting new 11-month records.
``It is unusual for two parts of the petroleum complex to diverge that widely,'' said Tim Evans, an analyst at Citigroup Inc. ``It really reflects two sets of traders who absolutely have their blinders on.''
Gasoline has fallen on a growing sense the nation's refineries are finally starting to produce enough gas to meet demand after months in which prices skyrocketed on an unusual number of refinery outages.
``What's going on is an expectation of a recovery of refining in the U.S.,'' said Antoine Halff, head of energy research at Fimat USA LLC.
Traders expect additional evidence of recovery in Wednesday's fuel inventories report from the Energy Department's Energy Information Administration.
Analysts surveyed by Dow Jones Newswires, on average, expect refinery utilization to rise by 0.5 percentage points to 90.7 percent. That will boost gasoline inventories by 560,000 barrels, while crude oil inventories will decline by 760,000 barrels, the analysts predict.
Distillate stocks, which include heating oil and diesel fuel, are expected to rise by 780,000 barrels.
Oil has risen on concerns about constraints in the supply of light, sweet crude from Nigeria, the North Sea and from Norway, where maintenance has reduced output to 1994 levels, Halff said. Growing demand for crude by refineries cranking out gasoline to meet summer demand has also supported prices, analysts say.
But Evans thinks speculation is the biggest reason oil prices are rising.
``There is a substantial flow of speculative buying into this market,'' Evans said.
And what's bought on speculation must be sold at some point, he said, explaining, ``I think we've got $10 or $12 of premium in the price (of crude) that doesn't really belong there.''
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