Traders expecting higher supplies sell down oil, gas

Traders expecting higher supplies sell down oil, gas

Oil and gas futures prices retreated Tuesday on expectations that a government inventory report today will again show that crude and gasoline stocks rose last week.

The weekly report by the Energy Department’s Energy Information Administration has become critical for analysts and traders during a spring and early summer that have seen an unusually high number of refinery outages. Those refinery problems have been widely cited by analysts as the reason for record gas prices, and high oil and gasoline futures prices.

An increase in inventories in today’s report could take some air out of the futures market, analysts said.

“People are trying to hit theexit door before these numbers come out tomorrow,” said James Cordier, president of Liberty Trading Group in Tampa, Fla.

Light, sweet crude for August delivery fell $1.41 and settled at $67.77 a barrel on the New York Mercantile Exchange, and gasoline for July dropped 5.56 cents and settled at $2.2469 a gallon. Brent crude for August delivery fell $1.19 to settle at $70.17 a barrel on the ICE Futures exchange in London.

In other Nymex trading, heating oil futures for July fell 4.91 cents to $1.9933 a gallon, and natural gas prices dropped 6.3 cents and settled at $6.877 per 1,000 cubic feet.

At the pump, gas prices fell by 0.3 cent overnight to a national average of $2.975 a gallon, according to AAA and the Oil Price Information Service. Retail gas prices, which typically lag futures prices, have fallen steadily since their May 24 peak of $3.227, though the rate of decline has flattened out in recent days.

In Venezuela, which is nationalizing its oil industry, ConocoPhillips and Exxon Mobil Corp. refused a government offer to let them continue working in the country as junior partners to its state-owned oil company. But that news was expected and had little effect on energy futures, analysts said.

“It’s not going to result in any less crude coming out of there,” said Kevin Saville, managing editor for the Americas energy desk at Platts, the energy research arm of the McGraw-Hill Cos.

On the domestic front, some analysts think gas prices are likely to stop falling and may even rise again in coming weeks if gasoline inventories don’t rise. Analysts surveyed by Dow Jones Newswires predict on average that gasoline inventories rose by 1.1 million barrels in the week ended June 22. Refinery use, which fell 1.6 percent last week, is expected to rebound by 0.8 percentage points to 88.4 percent.

If those expectations are met or exceeded, “that could bring crude oil prices down another $1 or $2,” Cordier said.

Still, inventories and refinery runs remain well below their average levels for this time of year.

Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said, “0.8 and 1.1 are both dismal numbers.”

Refiners, he said, “have a long way to go to make up for all the supplies they lost earlier in the year.”

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