Oil prices briefly dip, then jump
By BRAD FOSS, AP Business Writer
Mon Sep 25, 4:50 PM ET
Crude-oil futures briefly dipped below $60 a barrel on Monday, then jumped by more than $1 in a sign that the recent free-fall may be nearing an end.
Natural gas futures continued to sink amid record U.S. supplies, settling at a three-year low.
The average retail price of gasoline nationwide is now $2.38 a gallon — the lowest level since March — and analysts believe pump prices could soon decline to within pennies of $2 a gallon.
While that would no doubt be a relief for U.S. motorists after a summer with prices above $3 a gallon, gasoline is still about 70 percent more expensive than it was at the start of autumn just a few years ago.
While the petroleum industry is still raking in huge profits by any measure, the recent slide in oil and natural gas prices has taken some of the froth out of energy company stock prices.
Oil prices have fallen by more than 20 percent since the July peak above $78 a barrel thanks to rising global inventories, slackening demand growth and a perception among traders that geopolitical and weather-related supply threats have eased.
The downtrend was halted on Monday. Light sweet crude for November delivery on the New York Mercantile Exchange briefly fell as low as $59.52 a barrel, then bounced up to a settlement of $61.45, an increase of 90 cents for the day.
Some traders started buying amid speculation OPEC may cut production in order prop up prices; others were forced to buy in order to cover incorrect bets that oil futures would fall even more sharply than they have.
There is also a growing belief among traders that, with gasoline prices weak relative to the cost of crude, oil refiners have an incentive to reduce their output, which could trim market supplies.
"The market is just showing that it doesn't like being under $60 for too long," said BNP Paribas Commodity Futures broker Tom Bentz.
The last time front-month futures settled below $60 was March 10.
Oil prices have plummeted in recent weeks with signs of economic weakness in the U.S. and in the absence of new developments in the standoff between the United Nations and Iran. The summer spike in prices was fueled largely by concerns that Iran, which defied the U.N.'s Aug. 31 deadline to stop enriching uranium, might disrupt oil supplies if sanctions were imposed or if the monthlong conflict between Lebanon and Israel escalated.
Fears of hurricane damage to Gulf of Mexico output also drove the market higher this summer, but the storms so far have not threatened the region.
The Organization of Petroleum Exporting Countries recently reduced its demand forecast for the remainder of the year, citing weakening demand in the U.S., among other factors. However, some cartel members have insinuated that oil prices below $60 could prompt a production cut.
As oil has fallen, so have prices at the pump. The Oil Price Information Service said Monday that U.S. retail gasoline prices average $2.38 a gallon, a drop of 50 cents in the past month.
"We'll go beneath last year's autumn-winter low of $2.12 a gallon, and we may do so as early as October," said OPIS director Tom Kloza.
In other Nymex trading on Monday, gasoline futures rose by 2.89 cents to settle at $1.5001 a gallon, while heating oil futures edged almost a penny higher to settle at $1.6564 a gallon.
Nymex natural gas futures slid 15.2 cents to settle at $4.475 per 1,000 cubic feet — the lowest close since Sept. 26, 2003.
Shares of Exxon Mobil Corp., the world's biggest publicly traded oil company, gained 50 cents on the New York Stock Exchange to $65.41. That is in the upper end of its 52-week trading range of $54.50 to $71.22.
Shares of Valero Energy Corp., the country's largest independent refiner, rose by 21 cents to $48.40, near the bottom of its 52-week trading range of $45.86 to $70.75. |
