Crude Oil Prices Level Off; Pump Prices Continue to Drop
Growing U.S. production makes for a welcome CPG decline
MILWAUKEE -- Crude-oil prices fell again on Wednesday, continuing a trend that should result in gasoline prices hovering around $3 a gallon in the Milwaukee area for the rest of the year, an oil industry analyst told the Milwaukee Journal Sentinel.
Some areas of the United States have already seen prices fall below $3 a gallon, a welcome piece of news for families and businesses trying to move forward in an economy that seems to be standing still.
"It's always good when fuel prices drop," said Rachel Goelz, safety and compliance manager for Bonded Transportation Solutions, a shipping company in Milwaukee. "We spend thousands of dollars on fuel."
The latest news driving crude prices lower was a government report Wednesday that showed supplies for the week ended Friday increased by 5.2 million barrels, or 1.4%, to 378.9 million barrels, which is 1.2% above year-ago levels.
The report from the Energy Department's Energy Information Administration surprised the market, according to the newspaper report. Analysts expected an increase of 3 million barrels for the week ended Oct. 18, according to Platts, the energy information arm of McGraw-Hill.
U.S. crude for December delivery fell 94 cents per barrel to $96.86, its lowest settlement since July 1. Brent crude, often considered a broader indicator of global oil prices, lost $2.17, ending the day at $107.80 per barrel, its lowest settlement price since Aug. 8.
"The short story is we're just seeing a big buildup in (oil) supply here in the United States," said Jim Ritterbusch, an oil industry analyst based in Galena, Ill. "Production just keeps trending higher.”
Meanwhile, demand for gasoline remains flat, partially a reflection of the stagnant economy, according to the report.
"There hasn't been much demand for crude from the refinery system here, especially during the past month," Ritterbusch said.
The price situation may be different for diesel fuel, he said. That's because export demand for diesel is much stronger than exports of gasoline.
"We're moving a lot of diesel fuel out to Europe and Latin America," he said. "Export demand for diesel is greater than gasoline."
Nationwide, diesel was selling for $3.87 a gallon on average Wednesday, still well below its $4.11 average a year ago.
For gasoline, Ritterbusch said he expects prices to continue falling or at least staying where they are through the end of the year.
Crude oil prices may be close to bottoming out, but pump prices tend to lag the crude market.
"Somebody in Milwaukee is going to want a little publicity and they'll go to $2.99 sometime in the next week, I would guess," Ritterbusch added. Expect pump prices around here to hover around $3 to $3.25 a gallon for the rest of the year, he said.
Other data from the EIA report on Wednesday showed gasoline supplies in the U.S. fell by 1.8 million barrels, or 0.8%, to 215.5 million barrels. Supplies are still 8.5% higher than a year ago.
U.S. refineries ran at 85.9% of capacity on average, down 0.3 percentage point from the prior week. Analysts expected capacity to rise to 86.7%.
Nationally, the average price for a gallon of regular gasoline was $3.34, according to the AAA Daily Fuel Gauge report. In Wisconsin, the average price was $3.33. The average price in Milwaukee was $3.27. A month ago in Milwaukee, the average price was $3.42 and a year ago it was $3.39.