NEW YORK: Oil and gas futures prices retreated Tuesday on expectations that a U.S. government inventory report on Wednesday will again show that crude and gasoline stocks rose last week.
The weekly report by the Energy Department's Energy Information Administration has become critical for analysts and traders during a spring and early summer that have seen an unusually high number of refinery outages. Those refinery problems have been widely cited by analysts as the reason for record gas prices, and high oil and gasoline futures prices.
An increase in inventories in Wednesday's report could take some air out of the futures market, analysts said.
"People are trying to hit the exit door before these numbers come out tomorrow," said James Cordier, president of Liberty Trading Group in Tampa, Florida.
Light, sweet crude for August delivery fell $1.10 to $68.08 a barrel on the New York Mercantile Exchange, and gasoline for July dropped 3.7 cents to $2.2655 a gallon. Brent crude for August delivery fell $1.09 to $70.27 a barrel on the ICE Futures exchange in London.
In other Nymex trading, heating oil futures for July fell 3.15 cents to $2.0109 a gallon, and natural gas prices were unchanged at $6.94 per 1,000 cubic feet.
At the pump, gas prices fell by 0.3 cent overnight to a national average of $2.975 a gallon, according to AAA and the Oil Price Information Service. Retail gas prices, which typically lag futures prices, have fallen steadily since their May 24 peak of $3.227, though the rate of decline has flattened out in recent days.
Some analysts think gas prices are likely to stop falling and may even rise again in coming weeks if gasoline inventories do not rise. Analysts surveyed by Dow Jones Newswires predict on average that gasoline inventories rose by 1.1 million barrels in the week ended June 22. Refinery utilization, which fell 1.6 percent last week, is expected to rebound by 0.8 percentage points to 88.4 percent.
If those expectations are met or exceeded, "that could bring crude oil prices down another $1 or $2," said Cordier.
Still, inventories and refinery runs remain well below their average levels for this time of year.
Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said, "0.8 and 1.1 are both dismal numbers," refering to the inventory and refinery utilization figures.
"(Refiners) have a long way to go to make up for all the supplies they lost earlier in the year."
Analysts also predict that crude oil inventories rose by 1 million barrels last week, and that distillate stocks, which include heating oil and diesel fuel, rose by 200,000 barrels.
High gas prices do not seem to be impeding demand for gasoline. During the week that ended June 15, demand for gasoline rose 1.7 percent over the same week last year, according to EIA data.
The combination of high demand and low supplies could keep gas prices high. But Kevin Saville, managing editor for the Americas energy desk at Platts, the energy research arm of the McGraw-Hill Cos., notes that refiners are getting more gasoline out of each barrel of oil they process.
That means low utilization rates may be seen by traders as less of a factor if inventories rise. If inventories rise more than expected, Cordier said, "that could be the catalyst for a couple day's spill (in futures prices)."
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Associated Press Writer George Jahn in Vienna contributed to this report.
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