The big energy news today is that OPEC agrees to keep pumping as oil glut fears persist. I'll get to that news over the jump. In the meantime, indulge me as I bury the lede to concentrate on the local price at the pump.
Near the end of Gas prices up after Memorial Day weekend, I wrote "for my near-term predictions, I'm not forecasting any major price increases based on the retail price environment and the commodity futures." The answer to that was both yes and no. It was yes for the stations in my old neighborhood. Last week, "the old corner station was selling regular for $2.73, while the two open stations down the street were undercutting it at $2.69." Yesterday, the corner station was at $2.77, while the two open stations down the street were still at $2.69. It was no for the most convenient station on the way into work, which was advertising regular at $2.78 last week. Earlier this week, the same grade of gasoline was $2.88. Meanwhile, stations that are on my way home because of construction are selling regular at $2.75. I'll be sure to buy my gas at one of them from now on if I'm not in my old neighborhood.
Gas Buddy shows that the Detroit average has risen from $2.70 to $2.76 over the past week, so the stations in my old neighborhood are now priced correctly according to their historical patterns, something that happened because they stayed put. They have three more cents of rise in the Detroit average until they become underpriced. As for the commodity prices, Oil-Price.Net lists yesterday's closing prices for WTI at $59.13, Brent at $63.31, and RBOB at $2.03. All are up from last week, when WTI sold for $57.68, Brent closed at $62.58, and RBOB was at $1.99. Still, all three are cheaper than three weeks ago, when the comparable prices were $60.75 for WTI, $66.86 for Brent, and $2.04 for RBOB. That last comparison suggests that the fundamentals are not supporting any more than the usual seasonal rise in prices, and the news supports that. Follow over the jump for stories from Reuters.
I mentioned OPEC agrees to keep pumping as oil glut fears persist already. It's time to unearth the lede.
Oil group OPEC agreed to stick by its policy of unconstrained output for another six months on Friday, setting aside warnings of a second lurch lower in prices as some members such as Iran look to ramp up exports.I don't have to quote the paragraph about the reaction to the decision, as Reuters reported it in Oil up 2 percent after early swings on dollar, OPEC.
Concluding a meeting with no apparent dissent, Saudi Arabian oil minister Ali al-Naimi said OPEC had rolled over its current output ceiling, renewing support for the shock market treatment it doled out late last year when the world's top supplier said it would no longer cut output to keep prices high.
With oil prices having rebounded by more than a third after hitting a six-year low of $45 a barrel in January, officials meeting in Vienna saw little reason to tinker with a strategy that seems to have resurrected moribund growth in world oil consumption and put a damper on the U.S. shale boom.
"You'll be surprised how amicable the meeting was," a visibly pleased Naimi told reporters after the meeting.
Oil prices rose right after the decision, as market bulls tried to make up for losses since Wednesday. Brent and U.S. crude fell nearly 3 percent a day in those previous two sessions as traders locked in advance bets that OPEC would not cut supply.That was how the markets reacted. What about the oil patch? Again, Reuters has the answer in North Dakota refuses to flinch as OPEC keeps output high.
But the dollar's surge on a stronger-than-expected U.S. jobs report for May pushed crude down more than $1 a barrel. Brent hit seven-week lows, descending into sharp volatility until the late rally.
"The jobs report just blew away expectations and set the dollar on an unexpected run that tore into oil's gains," said Phil Flynn, analyst at the Price Futures Group in Chicago.
"But at the same time, bulls were already hedged for the OPEC decision not to cut output and ready for a relief rally after the losses of the past two days."
Oil executives in North Dakota, a center of the U.S. shale revolution, say OPEC made a questionable bet when it decided on Friday to stick with a policy that aims to push higher cost American producers out of the market by keeping output high.That optimism extends down to the workers, even though prospects aren't as rosy as they had been before the bottom dropped out, as CNN reports in Praying for oil prosperity in North Dakota.
Here, in the top U.S. oil state after Texas, oil companies have slashed costs over the last seven months to reach fighting weight - one that will allow them to profit despite the more-than 40 percent drop in prices over the past year and solidify the new American role as the world's swing supplier.
The policy OPEC first adopted in November has brought stress, but not catastrophe. Oil companies say they have recalibrated their operations to survive even if prices stay lower for a long while.
Indeed, while the number of North Dakota drilling rigs has plunged sharply so far this year - the count sat at 81 on Friday, down from 146 in early February - the state's oil production has proven resilient.
Output fell slightly in January and February, but jumped in March, highlighting the potential of shale wells to ramp up or down quickly, regardless of the cartel's actions.
CNN's Richard Quest visits a church in Williston, North Dakota, where the locals pray for prosperity to once again bless their part of the country.These people are confident they'll do just fine. I hope for their sakes they're right.