COLUMBUS, Ohio – Oil prices tumbled Wednesday as new government reports show crude inventories continuing to build, suggesting that demand for oil and gasoline will not rebound anytime soon.
Light, sweet crude for February delivery fell 50 cents to settle at $37.28 a barrel on the New York Mercantile Exchange after trading as high as $39.45.
Prices have fallen from as high as $50.47 just last week with evidence growing that a weakened global economy has eaten away at energy demand.
The Energy Department's Energy Information Administration said crude inventories grew by 1.2 million barrels for the week ended Friday. That was below the expectation of 3 million barrels, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
Yet the department said in last week's report that oil stocks jumped 6.7 million barrels the previous week, meaning less and less crude is being used.
Gasoline inventories rose by 2.1 million barrels, 300,000 barrels ahead of analyst estimates, and distillates increased by 6.4 million barrels compared with the estimate of a gain of 1.7 million distillates.
Crude appears to be headed back to the levels it reached nearly a month ago when it fell to $33.87 a barrel, the lowest mark since 2004.
The build in distillates — used for heating oil and diesel fuel — comes as blowing snow and frigid temperatures pound much of the country. The leading edge of the cold air was expected to move from the Midwest into the Northeast, mid-Atlantic and South by Wednesday and Thursday.
The weakness in the inventory report just shows how broad the economic downturn is becoming, oil analyst Stephen Schork said.
"No one can tell you where the bottom is," he said of oil prices.
Oil began to come off its highs for the session before the inventory report came out after the government reported that retail sales plunged far more than expected in December. The Commerce Department reported Wednesday that retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline that Wall Street expected.
For 2008, retail sales were down 0.1 percent, a sharp turnaround after a 4.1 percent gain in 2007. It was the first time the annual retail sales figure has fallen on government records going back to 1992. Before 2008, the weakest year for retail sales had been an increase of 2.4 percent in 2002, the year after the 2001 recession.
The report helped send Wall Street into another tailspin with the Dow Jones industrial average falling more than 200 points and major stock indexes off about 3 percent.
"The retail numbers were dismal," said Jim Ritterbusch, president of Ritterbusch and Association. "They drove the stock market and then we got spanked again."
The department also reported that businesses slashed inventories in November by the largest amount in seven years as they scrambled to cope with a record plunge in sales.
Inventories were reduced by 0.7 percent in November, even worse than the 0.5 percent drop analysts expected. It marked the third straight month that businesses have cut their stockpiles, the longest stretch since four straight months of reductions that ended in August 2003.
Despite the decline in the oil prices, the cost of filling up has not changed much. Prices at the pump rose 0.2 cents to $1.792 overnight, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices are 13.2 cents higher than a month ago, but $1.269 below what motorists paid a year ago.
In other Nymex trading, gasoline futures rose less than a penny to settle at $1.677. Heating oil fell 4.4 cents to $1.4702, while natural gas for February delivery fell 21.4 cents to $4.97 per 1,000 cubic feet.
In London, February Brent crude rose 33 cents to $45.16 a barrel on the ICE Futures exchange.
http://news.yahoo.com/s/ap/20090114/ap_on_bi_ge/oil_prices
Topic: Oil prices sink with US inventories bulging (Read 493 times)