Huge oil and gasoline supplies and lower demand drive prices down.

Huge oil and gasoline supplies and lower demand drive prices down

Both gasoline and crude oil prices have been slipping in Los Angeles County since the Memorial Day weekend, which normally starts the heavy driving season, industry observers said, and prices likely will skid lower.

This, of course, is good news for local motorists and truckers but is discouraging for thousands of Angelenos with equity stakes in oil wells.

Retail gasoline prices have slipped a couple cents a gallon in the last few weeks at a number of local filling stations. This is a reversal of the prior strong uptrend when retail gasoline prices were spurting a couple cents a gallon every week for six to eight weeks before Memorial Day here.

Nodding his head, Jim Wampner, manager of volume planning at L.A.-based Atlantic Richfield Co., declared: "You normally don't expect this softness in the gasoline market at this time of year."

Wampner ascribed the softness to supply and demand. "There's an awful lot of gasoline out there," he said, as the recession has cut demand.

In fact, according to the latest data reported last week by American Petroleum Institute, West Coast gasoline stocks mounted to 32.71 million barrels on June 14. That compares with 31.73 million the prior week, 29.82 million on May 24 and 27.68 million on June 15 last year, API revealed.

"That's a high level, very high," agreed Albert J. Anton Jr., perhaps the nation's premier oil analyst at Carl H. Pforzheimer & Co., a New York-based securities house that specializes in petroleum issues. If refineries were preparing for turnarounds (near close-down for maintenance and to adjust equipment for a different product mix), such stocks might be justified, Anton observed, but refineries did their turnarounds earlier this year.

Indeed, since completing turnarounds, West Coast refineries were operating at 94.5 percent of capacity in the week ended June 14, API reported last week. That compared with their operating at two-thirds capacity the prior week, according to API data, and 77.2 percent during the week ended June 15, 1991.

One result, API added: West Coast refineries expanded their daily gasoline output to 1.37 million barrels from 1.33 million and 1.16 million barrels in the same respective weeks.

If mounting gasoline stocks continue to put downward pressure on prices, Arco's Wampner said, "we may see some refinery cutbacks."

Adding to market instability, Pforzheimer's Anton noted: Both Chevron Corp. and Mobil Corp. have changed their marketing strategies now to charge the same price for credit-card as cash sales, thereby, joining Unocal Corp. and Shell Oil Co.

That leaves Exxon Corp. out on a limb, he indicated; Atlantic Richfield Co. long has had a policy of no credit cards but does accept debit cards.

Meanwhile, prices posted for crude oil produced in L.A. County have slipped 20 cents to 90 cents a barrel since Memorial Day, a development that reversed a rising trend earlier this year. Setting their 1990 highs last October, prices posted for local crude were in a general decline until mid-March when they were raised $1 a barrel and another buck a barrel in mid-April, but prices headed down again this month.

Chevron, for example, cut its posted price for 17-degree-gravity crude in the Wilmington field to $13.30 a barrel on June 14 from $13.40 June 7 and $13.50 April 12. L.A.-based Unocal cut its posted price for the same crude to $13.35 effective June 10 from $13.60 on April 12.

Chevron, likewise, cut its posted price for 27-gravity crude in the Long Beach/Signal Hill field to $15.35 on June 14 from $15.60 on June 7 and $16.15 April 12. Unocal cut its price for 29-gravity crude in the same field to $15.60 a barrel effective June 10 from $16.50 on April 12.

Making similar changes here, indicated a spokesman for the California Independent Petroleum Association, were such other posting companies as Mobil Corp. and Enron Oil Trading & Transportation Co. A notable exception is Koch Oil Co., which changed its crude pricing policy (see accompany story).

Given the current and forecast market dynamics, Pforzheimer's Anton projected a continuing slide in crude prices of perhaps another $2 a barrel before crude prices turn up a likely $2 a barrel by year's end.

PHOTO : The payoff: Less driving, lower prices