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We have been hearing a lot about refinery output this year as unusually low production has led to soaring gasoline prices at the pump. It appeared as though things had gotten back on track, with capacity rising above 90% for the past two week, but in today's weekly inventory report, the Energy Information Administration stated that production has once again fallen under 90%.Most of our attention lately has been geared toward following gasoline inventories in hopes that we would see levels rise enough to give us a little relief at the pump. Today we saw exactly that, with gasoline supplies rising by a generous 3.5 million barrels last week which was well above the 1.4 million barrels that analysts had been expecting to see. While this would typically lead us to expect to see the price of oil dropping, that is not what we are seeing today, with oil prices actually ticking up $0.30 to $65.91. The reason? You guessed it... falling refinery output.
Last week when the EIA released its weekly report we saw that refineries were running at 91.1%, which was still below where we would like to see them, but definitely an improvement. This week we see production falling below the psychological 90% mark once again, with last week's results showing refineries running at only 89.6%.
With refineries falling again, I would not expect to see too much more relief coming anytime soon when filling up your car. Prices have fallen slightly over the past couple of weeks, but I would expect to see them level out for a time while the market continues to monitor gasoline inventories as we head deeper into the summer driving months. Two weeks ago, according to AAA, we saw record high prices of $3.227 a gallon but these record highs have eased recently to a current national average of "only" $3.14 per gallon.
On Monday we looked at a major cyclone that was moving into the oil-producing Arabian peninsula that had the potential to disrupt output from that region. The only country that really seems to have been affected by the storm is Oman, which has seen two days of production disruptions to its 650,000 barrel a day output, but the rest of the region seems to be doing just fine. Iran, which puts out around 2.4 million barrels a day is saying that they have not seen any impact to their operations resulting from the current storm, which was downgraded to an equivalent of a category 1 hurricane today from a previous classification of a category 5.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
On Monday we looked at a major cyclone that was moving into the oil-producing Arabian peninsula that had the potential to disrupt output from that region. The only country that really seems to have been affected by the storm is Oman, which has seen two days of production disruptions to its 650,000 barrel a day output, but the rest of the region seems to be doing just fine. Iran, which puts out around 2.4 million barrels a day is saying that they have not seen any impact to their operations resulting from the current storm, which was downgraded to an equivalent of a category 1 hurricane today from a previous classification of a category 5.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
6-07-2007 @ 1:22AM
Patrick Smyth said...
think we'll hit $100 barrel this summer? And $6.00 at the pump?
6-07-2007 @ 5:16AM
Michael said...
I don't think we are going to move up that high, but I do think its a distinct possibility that we will see oil trade up to the mid to upper $70's before the end of this summer. A lot will depend on the hurricane season.
Gasoline I would imagine would not move much more higher than 3.30 or 3.40 a gallon, assuming that refineries are able to rise, and stay, abover 90% capacity.