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Oil prices fall PDF Print E-mail
Thursday, 07 August 2008

AP, NEW YORK -- Oil prices fell below $118 a barrel Wednesday after the government reported bigger-than-expected jumps in supplies of crude oil and distillates, suggesting high energy prices are still eating into demand.

Light, sweet crude for September delivery fell $1.62 to $117.55 a barrel in late-morning trading on the New York Mercantile Exchange. Prices earlier fell as low as $117.14, the lowest since May 2; they are now down about $30 from their record high of $147.27, reached July 11.

Falling crude kept weighing on retail gas prices. U.S. filling stations hungry for business ratcheted down the price for a gallon of regular on average by another penny overnight to $3.862, according to auto club AAA, Oil Price Information Service and Wright Express. Prices have now fallen more than 6 percent from all-time highs above $4 a gallon reached July 17.

The U.S. Energy Department's Energy Information Administration said crude supplies rose by 1.7 million barrels to 296.9 million for the week ended Aug. 1, slightly more than the 1.2 million-barrel increase expected by analysts surveyed by energy research firm Platts.

The EIA said inventories of distillate fuel, which include diesel and heating oil, jumped 2.8 million barrels to 133.3 million barrels, above the 2.3 million barrels expected by analysts.

Meanwhile, EIA data showed that gasoline stockpiles fell by 4.4 million barrels to 209.2 million barrels for the week ended Aug. 1, much more than the 1.4 million drop expected by analysts.

The government figures reflect the fuel that refiners have on hand. The big drop in gas stocks surprised some oil market traders, but analysts said it likely signals that gas distributors have taken more deliveries from the refiners as the summer driving season enters its last month -- not that U.S. motorists are suddenly ramping up their driving amid recent pullbacks in pump prices.

''I think we need to drop another 30 or 40 cents a gallon before we really see any change in driving habits,'' Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

Lending support to that idea, the EIA said demand for gasoline for the month ended Aug. 1 topped out at about 9.4 million barrels a day, 2.3 percent lower than the same period last year.

Meanwhile, investors again shrugged off tension over Iran's nuclear program. Iran's response to an incentives package aimed at defusing a dispute over its enrichment of uranium is unacceptable, U.S. officials said Tuesday. Prospects of new sanctions against the country are now more likely.

The market seemed to be reacting less to potentially bullish factors like the weather and geopolitical developments and instead was turning its attention more to fundamentals, ''in particular the rocky demand outlook in certain countries,'' said analysts at JBC Energy in Vienna, Austria.

In other Nymex trading, heating oil futures fell 5.68 cents $3.2252 a gallon, while gasoline prices fell 2.67 cents to $2.9285 a gallon. Natural gas futures shed 7.6 cents to $8.65 per 1,000 cubic feet.

In London, September Brent crude fell $1.01 cents to $116.64 a barrel.

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