California gas prices expected to jump overnight, possibly 30 cents by weekend

February 25, 2016

The slide in California's gasoline prices could abruptly end Friday, with prices possibly jumping 30 cents a gallon because of seasonal changes in the state's refinery operations, a consumer group predicted Thursday.

Prices often climb in California this time of year because refineries switch from the winter blend of fuel to the more expensive state-mandated summer blend, which evaporates less quickly during warm weather.

But this year's switch to summer gasoline has triggered a jump of 52 cents a gallon on the gasoline wholesale market in Los Angeles this week, which will lead to the higher pump prices predicted by advocacy group Consumer Watchdog.

“The summer blend should not be responsible for more than a few pennies, maybe a dime,” Consumer Watchdog President Jamie Court said at a news conference.

Court said motorists should have experienced lower prices earlier but refiners held onto gasoline that should have been made available to the market. With California's move to the more environmentally friendly summer blend of gasoline ahead of the busy driving season, he said, refiners emptied their inventories of the winter blend they no longer needed, causing prices to fall.

California's gasoline prices typically run higher than the rest of the nation because of the costs related to producing the state's less-polluting gasoline.

In addition, taxes and fees contribute to the higher prices.

But over the last year, the gap between prices in California and the rest of the nation widened.

The primary cause was the loss of production at Exxon Mobil's Torrance refinery, which was damaged in an explosion in February 2015.

The explosion destroyed a pollution control system and forced the oil refinery to reduce production to less than 20% of normal levels.

Torrance provides 10% of the state's total refined capacity and 20% of Southern California's total capacity. The plant is expected back online in the second quarter of 2016 and then is set to be sold to PBF Energy in New Jersey.

Local gas prices fell precipitously over the last few weeks, reaching as low as $1.99 a gallon Thursday at a Burbank Costco, according to GasBuddy.com.

But most service stations in Southern California are charging more than $2 a gallon, which is substantially higher than the rest of the country.

Jeff Spring, spokesman for the Automobile Club of Southern California, said prices are poised to increase as refiners change formulas, “and it may settle down once the summer grade gets in place.”

As for how much prices will jump, “it's kind of hard to read the tea leaves,” Spring said.

California's average price of regular gasoline was about $2.31 a gallon Thursday, down 24% from $3.03 a year ago, according to AAA. In the Los Angeles area, the average was $2.36, while the nationwide average stood at $1.71.

Starting in July, though, a little bit of a price break will kick in: California drivers will pay 2.2 cents less for a gallon of gasoline, as the Board of Equalization decided to cut the state excise tax.

New Jersey is poised to lose its claim to the second-lowest gas taxes in the nation.

The state Legislature on Friday passed legislation raising the tax on gasoline sold in New Jersey by 23 cents a gallon, the centerpiece of a controversial tax package that also includes $1.4 billion in tax cuts.

U.S. Oil Falls Into Bear Market Amid Worries Over Supply Glut

Brent, Nymex reach levels not seen since last fall

June 20, 2017

U.S. oil prices suffered another day of big losses, entering a bear market and setting new lows dating back to August as oversupply concerns continue to roil the market.

Money managers are, yet again, pulling out from what had been a big bet that global exporters could ease oversupply through a historic agreement to cut output, analysts and a broker said. These types of big selloffs have become common in the oil markets since March. The market is now on pace for its eighth loss of more than 2% in just the past two months.

Rising production from the U.S. and Libya, and stubbornly high stockpiles are undermining predictions that cuts from other producers would send prices higher. Money managers had placed a record high number of bets that oil prices would rise even after they went beyond $50, but that has led to a strong momentum for prices to keep falling as those traders backtrack, analysts and a broker said.

U.S. crude for July delivery lost 97 cents, or 2.2%, to $43.23 a barrel on the New York Mercantile Exchange, trading at prices it hasn’t settled below since September. A settlement at $43.56 a barrel or lower put oil into a bear market, which means it has lost 20% or more since the recent high, a nearly one-year high on Feb. 23.

Brent, the global benchmark, lost 89 cents, or 1.9%, to $46.02 a barrel on ICE Futures Europe, lows dating back to mid-November.

Many traders have been watching U.S. inventory levels, and that may be playing a role again Tuesday. With all the momentum pushing the market lower, even traders who believe output cuts are putting the market closer to a supply shortage aren’t willing to place bets on that until after the U.S. government’s influential weekly report on storage levels, due Wednesday morning, said Scott Shelton, broker at ICAP PLC.

Analysts and traders surveyed by The Wall Street Journal expect crude stockpiles to fall by 2 million barrels, on average, in the week ended June 16. The U.S. Energy Information Administration report is scheduled for release at 10:30 a.m. ET on Wednesday.

The Organization of the Petroleum Exporting Countries and big-producer allies did agree last month to extend an agreement through March that effectively holds back almost 2% of the global crude supply. But that didn’t satisfy traders who think that may not be enough to end an oversupply that dates back to 2014, and prices have fallen 17% since OPEC announced the extension in late May.

The 14-nation cartel’s aim is to draw down a glut of oil and raise prices, but oil in storage has remained at stubbornly high levels. OPEC’s efforts are being undermined by its own members, some of whom have exemptions, and rising production in other countries, notably from shale-drillers in the U.S.

Inventories aren’t on pace to fall into OPEC’s target area any time in the next 18 months, Morgan Stanley analysts said in a note released Tuesday morning. Rising demand from drivers in the summer is likely to keep stockpiles falling through the end of this year, but it is enough to cut only a little more than half of a surplus currently in storage, compared with five-year-average levels, the bank said.

Its estimates show surging U.S. production and the eventual rebound of OPEC and Russian production will cause inventory levels to rise again starting in 2018. OPEC would need to extend its cuts through the end of 2018 or make deeper cuts to get inventories back down to historical averages, said the Morgan Stanley team, led by Martijn Rats.

Libya, an OPEC member that was exempt from the supply cut, is ramping up its oil production and has almost achieved its short-term production goal of 900,000 barrels a day, said analysts for Commerzbank .

U.S. oil drillers continue to ramp up their production. The latest data from the oil-services firm Baker Hughes showed the rig count climbed by 6 to a 26-month peak of 747.

Identifiable oil inventories—both oil and products in the Organization for Economic Cooperation and Development, China and selected other non-OECD countries—increased at a rate of around 1 million barrels a day in the first three months of 2017, according to Morgan Stanley.