Retail gasoline prices in California fell for the second straight week, the Energy Department said Monday, as refineries increased production.
The national average also dropped for the eighth straight week. The average price of a gallon of regular gasoline in California declined 2.9 cents to $3.069, two weeks after hitting its high for the year at $3.153. California refineries were producing more than 6.4 million barrels of gasoline a week, or as much as 380,000 barrels a week more than they were in August, according to California Energy Commission statistics.
That was more than enough to compensate for production losses from recent refinery fires in the state, analysts said.
California refineries also slashed the amount of cheaper-grade gasoline they made for sale outside the state by more than 33% to 826,000 barrels a week. Analysts said profit margins collapsed in places such as Arizona, where some of that cheaper-grade gasoline is sold, with stations there selling fuel for as little as $1.99 a gallon.
Nationally, the average price of a gallon of gasoline fell 3.1 cents to $2.468.
"Nationally, we are pretty close to where prices ought to be, but California still has a lot of catching up to do on the downside," said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey. Kloza said Californians should see prices averaging around $2.75 a gallon in the coming weeks.
Predicting oil's course is a lot more difficult, analysts said, with markets reacting by the hour to international news, economic indicators and currency fluctuations.
Early Monday, crude oil futures fell below $69 a barrel based on encouraging signs of stability in Nigeria and news that Russia was adding production to what was already considered an oversupplied market, said Phil Flynn, senior analyst at futures trading and research firm PFGBest.
Rebel leaders in the oil-rich Niger River Delta of Nigeria extended a cease-fire as some militants agreed to lay down their arms. Violence between rebels and the government has taken a toll on production for the fifth-biggest supplier of oil to the U.S. Russian oil production also has risen to its highest levels since the end of the Soviet Union, Flynn said.
But crude oil futures for November delivery ended the day up 46 cents a barrel at $70.41 a barrel as the dollar lost value against the euro and the Institute for Supply Management reported the first growth in 11 months in the non-manufacturing sector index of healthcare, utilities, construction, retail and wholesale industries.
Oil has traded consistently in a range of $65 to $75 a barrel since July and was overdue for a fall, Flynn said.
"It's becoming harder and harder to ignore the huge oversupply of oil," he said. "The minute the dollar gets an iota of strength, this market is going to crack."