The failure of major oil exporting countries over the weekend to freeze output will help keep gasoline prices this summer lower than last summer, experts said.
At a meeting in Doha, Qatar, 18 major producers were unable to reach an agreement not to increase production beyond January’s levels from now to October because Saudi Arabia refused to sign unless all the other nations did. Iran has refused.
“The good news for the consumer is that the producers remain in disarray so that it is likely that the oil market will remain oversupplied throughout the summer, providing relief at the pumps,” Andy Lipow, president of the Houston consulting company Lipow Oil Associates LLC, said Monday. He said gasoline supplies are ample, though demand is at record levels.
But, he said, any significant drop near term in prices likely will be prevented by two recent events: a strike Sunday by Kuwaiti oil workers that shut off 60 percent of its output; and a declaration by Shell in February of a “force majeur” event — a business disruption beyond the company’s control — at a terminal in Nigeria where a leak caused by an explosion disrupted operations of a pipeline. Terrorism was suspected.
Reuters, citing a local newspaper, Tuesday evening reported that the Kuwaiti strike had ended.
Another analyst, Carl Larry, the Houston-based director of oil and gas for Frost and Sullivan, the global consulting company, said the current $40 per barrel price level of crude oil is at least $10 too low for most U.S. producers to be profitable. The drop since mid-2014 in crude prices has forced many U.S. producers using high-tech methods such as hydraulic fracturing to reduce output or shut down.
That trend means refiners must import more oil at greater expense because of shipping costs, Larry said. “I think the action in Doha actually is a disadvantage to us,” he said. “The more we import, the higher the pump prices go.”
The cash price for regular gasoline averaged $2.293 on Long Island Tuesday, said the AAA, a motorist club. It has risen 36.2 cents from a recent low of $1.931 on Feb. 27. Crude oil prices have risen from about $26 a barrel to around $40, demand for gasoline has risen seasonally and the industry has switched over to higher-cost summer grade gasoline.
A year ago Tuesday, regular gasoline averaged $2.677 a gallon on Long Island. On July 4, the average was $3.017.
“There might be some slight further increase in prices, depending on what crude does,” Lipow said. “But we’re well supplied in inventory.”
The benchmark grade of U.S. crude oil settled at $41.08 a barrel Tuesday, up 3.3 percent from Monday’s close on the New York Mercantile Exchange.
With Bloomberg News