Gasoline Prices Continue Falling

The decision taken yesterday at the OPEC oil ministers’ meeting in Vienna to formalize a new production limit of 30 million barrels/day, up from the previously agreed quota of 24.85 million barrels/day, has pushed down the price of gasoline by the largest amount in nearly four months. Gasoline futures on the Nymex fell to $2.50/gallon, more than $0.12.

According to gasbuddy.com, US pump prices today are near $3.27/gallon, down from around $3.30/gallon last week.

Yesterday’s petroleum status report from the US Energy Information Agency showed a jump in gasoline inventories of 3.8 million barrels last week, putting US supply above the top of the five-year range. Diesel fuel inventories also rose, by 500,000 barrels, but remain near the lower limit of their five-year range.

Falling prices for crude oil and lower demand have been putting downward pressure on pump prices for some time now, and OPEC’s adoption of a new total production target virtually guarantees that the cartel will produce at or, more likely, above the new target and help keep a lid on both crude prices and refined product prices.

The slowdown in China’s economic growth has also helped keep prices down, but the recent loosening of bank reserve requirements and lowering of interest rates could push up Chinese demand again.