A slew of global economic and geopolitical factors are working to pummel the price of oil and set up US drivers for very low gasoline prices later this year.
The Associated Press reported that the price of US crude dropped 7.7 % Monday (July 6) and fell another 3.6% Tuesday morning to close at $50.64 a barrel and is now down 15% from the high for the year set on June 10.
Gasoline prices in the US will likely slide somewhat from a national average of $2.77 over the next few weeks. Experts then expect a substantial decline in late summer and fall, pushing average gasoline prices in some low-price states below $2 a gallon again.
‘‘We’re going back to some of those low numbers we saw over the winter,’’ said Tom Kloza, chief oil analyst at the Oil Price Information Service. ‘‘In some places [gas] prices starting with a 1 should come back by football season.’’
There are several signs around the world that point to falling demand for crude and fuels at a time when supplies are high and possibly rising:
— The Greek financial crisis could slow economic activity in Europe, which would reduce demand for gasoline and diesel.
— China’s oil imports have already slipped this year and a plummeting Chinese stock market could mean even weaker demand in the world’s second largest oil consumer.
— Oil production in OPEC, driven by strong production from Saudi Arabia and Iraq, is helping to keep the world’s supplies high. OPEC’s June production rose for the fourth month in a row, to 31.3 million barrels per day, according to a report Monday from Platts. That’s 1.3 million barrels per day more than the cartel’s official target and the highest level since August of 2012.
— Iran is eager to begin exporting oil that has been held back by sanctions, and talks between the US and Iran that could lift those sanctions appear to be progressing.
— US oil production remained strong even after drillers slowed their activity in the face of low oil prices — and now some drillers are ramping up production again.
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