Prices Fall on Weakened Demand for Oil, Gas
Posted on: Thursday, 8 May 2008, 03:00 CDT
Oil prices pulled back sharply Wednesday after the government released data suggesting that the high price of oil and gasoline are depressing demand for petroleum products.
The demand numbers in the Energy Information Administration's weekly inventory report overshadowed data showing that supplies of oil grew less than expected last week, while gasoline and heating oil supplies fell.
Gas prices at the pump, meanwhile, slipped lower for the third day while diesel fuel rose to another record.
Overall consumption of oil and its products fell by 3.2 percent over the past four weeks compared to the same period last year, the EIA said. Demand for gasoline fell by 1 percent.
"It doesn't look like we've got much in the way of demand here for gasoline," said Tim Evans, an analyst at Citigroup Inc., in New York.
Light, sweet crude for April delivery fell $4.94 to settle at $104.48 a barrel on the New York Mercantile Exchange, the largest one-day price decline for a front-month oil contract since 1991. The April contract expired at the end of Wednesday's session, and trading was much heavier in May oil futures, which fell $5.96 to settle at $102.54 a barrel on the Nymex.
The market's reaction to the tepid demand data marked a change from its recent focus on the falling dollar, with investors looking more closely at oil supply and demand fundamentals.
Oil and other commodities are viewed as a hedge against inflation, and tend to rise in price when the dollar falls.
Investors shrugged off EIA data showing that crude oil supplies grew by 200,000 barrels last week, much less than the 2.1 million barrel increase analysts surveyed by Dow Jones Newswires, on average, had expected.
Gasoline inventories fell by 3.5 million barrels, when analysts had expected a small increase, and supplies of distillates, which include heating oil and diesel fuel, fell by 2.9 million barrels, more than double the expected decline.
Gas prices dipped by 0.1 cent to a national average of $3.279 a gallon, according to AAA and the Oil Price Information Service.
Originally published by Associated Press.
(c) 2008 Augusta Chronicle, The. Provided by ProQuest Information and Learning. All rights Reserved.
Source: Augusta Chronicle, The
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