Oil price nears six-week high nearing holiday

Domestic benchmark oil prices on Thursday finished the day at more than $70 a barrel for the first time in seven weeks, providing a boost for the industry heading into the Labor Day weekend.

The price jumped following Wednesday’s report from the U.S. Energy Information Administration that the country’s crude oil inventories fell by 2.6 million barrels last week, more than twice the level expected by industry analysts.

Traders also have been closely watching Iran, where U.S. sanctions are expected to slow exports beginning in November. The Wall Street Journal reported Thursday that officials at Iran’s state-owned oil company have said the company’s exports are expected to drop to 1.5 million barrels a day in September, down from about 2.3 million barrels a day in June.

U.S. benchmark West Texas Intermediate crude added 74 cents Thursday to close at $70.25 a barrel. Natural gas added a penny to $2.87 per thousand cubic feet.

While oil analysts credited this week’s price run-up at least in part on the country’s crude oil storage levels, the U.S. Energy Information Administration warned Thursday that those numbers often are misleading heading into a holiday weekend.

“U.S. holiday weekends associated with increased driving, such as Labor Day and Memorial Day, often result in large swings or changes in gasoline product supplied,” the government pointed out in Thursday’s report.

U.S. refineries have been running near capacity throughout most of the year, but crude levels often dip before holiday weekends as refiners stock up on gasoline to meet expected increased demand.

While higher oil prices typically lead to higher gasoline prices, any gasoline run-up for the weekend is expected to be short-lived.

The national average price for a gallon of regular unleaded gasoline was almost $2.84 Thursday, up a penny overnight and up 9 cents over the past week, according to AAA. In Oklahoma City, Thursday’s average was almost $2.62 cents a gallon, up less than a penny from the previous day and up about 3.5 cents over the past week.

Gasoline prices typically increase as demand surges before holiday weekends, and the recent increase in crude oil likely also is contributing to this week’s increase in gasoline prices. But relief at the pump is expected over the next few weeks, both as demand drops and as refiners switch to less-expensive winter blends.

“The decline in travel that typically occurs with everyone going back to school and getting back to fall routines decreases the demand, so prices likely will decline fairly substantially,” AAA spokeswoman Leslie Gamble said earlier this week. “That will be a good thing for consumers.”