Retail gasoline prices dropped a cent overnight Tuesday, and oil and gas futures also fell as a cyclone approaching the Persian Gulf veered away from major oil facilities.
Though Cyclone Gonu was headed toward Oman's east coast, the country's major oil installations are not directly in the storm's projected path. They continued to operate but took precautionary measures as Gonu approached.
Saudi Arabia's government issued a statement saying the cyclone would have no “direct effect on the central and eastern parts of the kingdom.”
Light, sweet crude for July delivery fell 30 cents to $65.91 a barrel on the New York Mercantile Exchange. Gasoline futures for July fell 2.47 cents to $2.2133 on the Nymex.
Gas prices also fell at the pump Tuesday to a national average price of $3.148 a gallon, down nearly 8 cents from their peak late last month, according to AAA and the Oil Price Information Service.
In other Nymex trading, heating oil futures rose 0.89 cent to $1.9735 a gallon while natural gas prices fell 5.4 cents to $8.137 per 1,000 feet.
Brent crude for July rose 9 cents to $70.49 a barrel on the ICE Futures exchange in London.
Oil and gas futures rallied Monday on fears that Gonu would wreak havoc in the Gulf.
“It appears to be overblown, to a degree,” said John Kilduff, an analyst at MAN Financial.
Positive news from Nigeria, a major U.S. crude supplier, also gave traders a reason to sell.
“Royal Dutch Shell has resumed normal operations at its 150,000 barrel-per-day Bomu pipeline after the facility was shut down due to occupation by local protesters last week,” wrote Barclays Capital analyst Kevin Norrish in a research note. “The company also said it was holding discussions with the local community in the Nembe region to reopen a 77,000 barrel per day pipeline that has been shut since May 25.”
Despite the respite in price increases, Kilduff said markets remain extremely sensitive to any perceived supply disruptions. The first half of the year has seen an unusually high number of refinery outages that have crimped gasoline supplies and led to this spring's high prices.
Word Tuesday morning of a minor outage at a BP refinery in Texas City was just the latest in a string of problems, Kilduff said. But traders are beginning to believe the summer supply crisis many had predicted will not materialize, he said.
“The gasoline … priced in a crisis scenario that's failing to materialize,” Kilduff said.
That sentiment could change quickly, sending prices higher, if there are any additional outages.
“It's still refinery roulette,” Kilduff said.
As they do every week, traders will take a close look at the Energy Department's petroleum inventory report Wednesday.
According to a Dow Jones Newswires survey of analysts, gasoline stocks are expected to rise by 1.5 million barrels, distillate stocks by 800,000 barrels and crude inventories by 120,000 barrels. Refinery utilization is expected to rise by 0.6 percentage point.
