Algerian Energy Minister and OPEC President, Chakib Khelil, said on Monday that "Current prices are not linked to the laws of supply and demand" and again told reporters OPEC will not raise output until after their production meeting in September.
OPEC is keeping the hard line on raising oil production for two reasons. The first is because they can. There is no other additional oil available. The majority of the non-OPEC nations are either already pumping at 100% or already in decline. There is no other supply. The second reason OPEC can be so firm in their positions is because only two OPEC nations, Saudi Arabia and Angola, actually have excess production. Several OPEC nations will become net importers over the next three years themselves. If you don't export then you don't belong in the Organization of Petroleum Exporting Countries.
If your store only had 1000 of a particular high demand product and you would never get any more then odds are good you would not discount that product just to get rid of it. You would only put a few out at a time and continue to raise the price to whatever the market would bear. OPEC can't get any more oil and with 25% of global production going to the U.S., a country they don't like anyway, there is no reason for them to increase production just to lower prices for us. They have a shrinking asset and the prudent thing for them to do is prolong the production of that asset as long as possible. What would you do in their position? Blow it all out now and be broke in ten years? I doubt it. We can all complain about OPEC but they are only acting in their own best interests.
In local news Holly Corp said a key unit at its New Mexico refinery was shut down for repairs and cutting gasoline production by an estimated 750,000 gallons per day. This comes the week before the start of the summer driving season and the week where gasoline prices typically hit their high for the summer.
The national average for gasoline reached $3.79 on Monday with Diesel at $4.52 per gallon. Some areas are already well over those levels with parts of California seeing $4 and higher for gasoline for several weeks now.
The electronic futures contract for June expired at the close of trading on Monday and the open outcry futures will expire at the close of the regular session on Tuesday. Short interest remains very high so anything is possible on Tuesday. The open interest suggests we could see some selling in the July contract when it becomes the front month on Wednesday. Of course the bears have been saying that for months now to no avail.