A slew of global economic and geopolitical factors are working to pummel the price of oil and set up USA drivers for very low gasoline prices later this year.
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“It’s not only what’s happening here in the continental USA, it’s what is happening throughout the world”, said Nancy White, a spokeswoman the AAA Motor Club, which tracks gasoline prices through its Fuel Gauge Report.
China’s Shanghai Composite Index, in a free-fall for most of the week, recovered by the closing bell Thursday, up 203.7 points, or 5.79 percent. The WTI price slumped to around $51.70 (down about 1.3% for the day) shortly after the report was released.
“Crude oil prices plunged yesterday as Greek uncertainty and worries over a slowdown of the Chinese economy weighed on market sentiment”, noted Sucden analyst Myrto Sokou.
The oil price crash came fast and furious to start the week.
The IEA said Saudi Arabian crude oil supply rose 50,000 bbl/d to a record high of 10.35 MMbbl/d in June, while Iraq crude oil output surged 270,000 bbl/d in June to its highest-ever rate of 4.12 MMbbl/d. If a deal is reached, sanctions now limiting Iran’s oil exports would eventually be lifted, allowing the nation to sell more oil to the already-oversupplied global market.
That would be the highest annual production since 1970, which saw 9.6 million barrels a day, making it the most productive year ever for the United States. Sanctions were imposed on Iran by the US and the worldwide community in 2010, targeting Iran’s economic activities.
Oil’s advance is paring a second weekly loss driven by China’s equities rout and the turmoil in Greece.
“The Chineses stock market rebound has calmed the oil market”, Thomas Pugh, a commodities economist at Capital Economics, a London-based independent research firm, told Anadolu Agency. Oil prices, about 45% lower than a year ago, may need to decline further to reduce the supply glut.
Oil then remained stable until the middle of last week.
Last week was the first time in 29 weeks the number of oil rigs in use rose.
Oil markets – just like other financial markets – are also being rattled by the Greek voters’ decision to reject the European Union’s latest bailout offer. As for Greece, it really does look like, one way or another, the situation will be resolved – or at least make some genuine progress – by the time this weekend is over.
The euro trended higher against the dollar at USD1.1136 on Friday, as compared to its previous close of USD1.1038 in North American trade late Thursday.
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Total gasoline inventories increased by 1.2 million barrels last week, according to the EIA, and remain in the upper half of the five-year average range. That demand will keep prices from tumbling even lower.
