Oil Falls Below $125


Crude oil futures fell below $125 a barrel for the first time in seven weeks after a U.S. government report showed that fuel stockpiles increased as consumption tumbled to the lowest in more than a year.

Gasoline supplies rose 2.85 million barrels last week, the Energy Department reported. Stockpiles of distillate fuel, a category that includes heating oil and diesel, climbed 2.42 million barrels. U.S. fuel demand averaged 19.9 million barrels a day, the lowest since January 2007.

Crude oil for September delivery fell $3.98, or 3.1 percent, to settle at $124.44 a barrel at 2:59 p.m. on the New York Mercantile Exchange, the lowest close since June 4. Futures are up 66 percent from a year ago.

Oil fell as low as $121.61 a barrel on June 5 and touched $120.75 on May 15.

Demand has dropped for three straight weeks, the Energy Department report showed. U.S. fuel consumption averaged 20.3 million barrels a day in the past four weeks, down 2.1 percent from a year earlier, the department said.

Refineries operated at 87.1 percent of capacity last week, down 2.4 percentage points from the week before, according to the department. It was the lowest utilization rate since the week ended May 9. Refineries were forecast to operate at 89.5 percent of capacity last week, unchanged from the week before, according to the median of analyst estimates in the Bloomberg survey.

Crude-oil inventories dropped 1.56 million barrels to 295.3 million. Stockpiles were forecast to decline 675,000 barrels, according to the survey results.

Gasoline for August delivery fell 11.26 cents, or 3.6 percent, to settle at $3.0344 a gallon in New York, the lowest close since May 2. Futures reached a record $3.631 a gallon on July 11.

Pump prices are following changes in futures. Regular gasoline, averaged nationwide, fell 1.3 cents to $4.042 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices reached a record $4.114 a gallon on July 17.

Crude oil has tumbled 16 percent from a record $147.27 a barrel on July 11, as a stronger U.S. dollar limited the appeal of commodities as a hedge against inflation and high prices cut fuel consumption. Price also fell the past two days because a hurricane moved away from oil platforms in the Gulf of Mexico.

Oil and other commodities may drop further and the dollar increase if the Federal Reserve boosts interest rates to curb inflation. Philadelphia Fed President Charles Plosser today said higher mortgage costs and continued declines in house prices pose no bar to raising interest rates.

Hurricane Dolly came ashore in southern Texas today, where coastal residents sustained their first direct hit by a hurricane in almost a decade. Dolly packed winds of 100 miles (161 kilometers) per hour as its eye hit South Padre Island, about 35 miles (50 kilometers) northeast of Brownsville, at 1 p.m. local time, according to the U.S. National Hurricane Center.

Dolly is the season's first hurricane in the Gulf of Mexico, home to about a quarter of U.S. oil production. The storm has steered south of most rigs, which are off the East Texas and Louisiana shores.

Brent crude oil for September settlement dropped $4.26, or 3.3 percent, to close at $125.29 a barrel on London's ICE Futures Europe exchange

 

 


TradingEconomics.com, Bloomberg
7/23/2008 3:30:45 PM