Washington - Oil prices continue to lag despite efforts by supply-giants
"If oil prices remain below $50 a barrel, as they are currently, that will keep gasoline prices low," said Pavel Molchanov, an energy analyst at the investment firm Raymond James. "Our team's forecast is for oil prices to recover, not tomorrow or next week, but over the next six to 12 months."
For now, however, prices have hit a lull, falling nearly 10 percent since the last Organization of the Petroleum Exporting Countries in late May. Another steep drop came Wednesday after two new oil market reports, one showing tepid gasoline demand in the United States and the other showing an increase rather than a cut in OPEC output.
The federal Energy Information Administration on Wednesday said that US gasoline stockpiles rose by 2.1 million barrels to 242 million barrels. For the second week, gasoline demand was weak, disappointing many analysts and traders who had been looking for a rebound. The price benchmarks for crude oil fell sharply after the report's release.
Meanwhile, OPEC, led by
But the International Energy Agency reported Wednesday that
rather than falling, the cartel's daily output rose 1 percent to more than 32
million barrels per day. The IEA said that increase was due to higher
production in strife-torn
Other factors contributing to the oil surplus include
Shale oil production accounts for more than half of
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Despite an increase in
"Global demand is growing this year at the same time as
global supply is down," Molchanov said. Molchanov said recent
Many oil companies, particularly the independent shale oil producers who tend to be more nimble than the super majors such as Exxon and Chevron, have learned to earn profits with sub-$50 oil. Still, the shares of those independent drillers tumbled Wednesday as crude prices sank.
A rise to $70 would put profits in companies across the board. It would also boost income for the OPEC and non-OPEC oil exporting countries, many of whom are struggling to balance their budgets at lower oil prices.