Updated from 1:17 p.m. EDT
After gaining for three straight days, oil prices dipped Friday on expectations that the
Organization of Petroleum Exporting Countries
another boost in oil production as early as next week.
Still, lingering doubts about Saudi Arabia's intent or ability to carry through with the oil production increase it announced two weeks ago limited the losses, keeping prices around the $30-a-barrel threshold. That's considerably higher than Saudi Arabia's mid-$20-per-barrel target range.
Midday Friday, the price of light crude oil for September delivery was down 11 cents at $30.30 a barrel. The price of crude oil for September delivery closed up 2 cents, at $30.43 a barrel. The London benchmark Brent crude for September delivery was off 13 cents at $29.04 per barrel.
Industry analysts don't see prices falling much further until OPEC members show support for the Saudi proposal. In a report released Friday,
GNI Research Group
analysts said Saudi Arabia's proposed oil hike "is very quickly turning into a sham in the eyes of many traders."
announcement early last week that it planned to increase production by a half-million barrels of oil a day had sent the price of crude oil down about $2 per barrel. But crude oil prices have rebounded this week on doubts that the cartel would support Saudi Arabia's unilateral decision.
Adding further confusion to the situation were reports Thursday that Saudi oil officials had called for a July 12 emergency meeting of OPEC ministers. If that raised expectations that a production increase was imminent, they were quickly dampened by indications that some cartel members had rebuffed the invitation.
"The market has essentially been whipsawed on this whole idea of whether OPEC will or won't raise production by 500,000 barrels per day. No other OPEC oil minister has stepped forward and said 'We're all for this'," said Tim Evans, senior oil analyst at
. "Now it doesn't seem there's even an OPEC consensus to hold a face-to-face meeting to resolve the apparent rift within OPEC."
OPEC members have already approved one production increase. In a deal that included all of OPEC's 11 members except Iraq, the cartel agreed last month to raise their output ceiling by about 3% to 25.4 million barrels a day starting on July 1.
While the agreement represented a whopping 708,000-barrel-a-day increase in the production ceiling, the actual daily increase in production is expected to be much lower -- by some estimates, just 300,000 extra barrels a day. That's because OPEC members were already exceeding their production quotas, producing at or near capacity before the new agreement went into effect.
The average nationwide gasoline price is now $1.59 per gallon, up 43 cents from a year ago, according to the
Energy Information Administration
. That's down slightly from recent retail prices. John Cook, the EIA's petroleum division director, estimated that crude oil price increases have added about 33 cents per gallon to the price at the pumps. Low gasoline inventories have added another dime to the price per gallon.
Tightening crude oil supplies initially sparked the jump in prices. With crude oil stocks lower than usual, there was little to cushion the effects of the higher prices and gas prices surged across the country. The situation was exacerbated in the Midwestern states by regional pipeline and refinery supply problems and difficulties among refiners transitioning from winter to summer grade gas.
In Chicago and other Midwestern cities, the price of retail gas jumped above $2 a gallon -- 30 cents higher than the average price in surrounding states -- before easing slightly.
In testimony before a
committee on Thursday, Cook warned that, although gas prices have come off their May highs, there may be more volatility before the summer is over -- particularly as consumer consumption is not likely to recede.
"As we enter the peak gasoline season, refiners will be pushed to just meet demand," said Cook. "With low stocks and refineries operating at high levels, any supply disruptions could trigger another price run-up."
On Thursday, the Senate rejected proposed legislation to suspend the 18.4-cent-a-gallon federal tax on gas through November in an effort to try to ease consumer prices.