NEW YORK – Oil prices fell by almost $2 a barrel Wednesday after weekly government data showed rising supplies of gasoline and flat demand.
Michael Guido, director of commodity strategy in New York for Societe Generale, said the recent softening of demand for gasoline suggests pump prices — now averaging $2.87 a gallon — are having an impact on consumer behavior. Moreover, the high prices are encouraging record gasoline imports, Guido said.
"I wouldn't be surprised to see the market move down into the mid-$60 range from here," Guido said.
Light, sweet crude for July delivery fell $1.90 to settle at $69.86 a barrel on the New York Mercantile Exchange, where June gasoline futures declined by 8.9 cents to finish at $2.019 per gallon.
In London, Brent crude for July delivery lost 58 cents to $70.42 a barrel on the ICE Futures exchange.
The weekly petroleum snapshot from the Energy Department showed crude oil inventories declined by 3 million barrels last week to 343.9 million barrels, or 3.6 percent above last year.
Gasoline inventories grew by 2.1 million barrels to 208.5 million barrels, or almost 3 percent below last year, while supplies of distillate, which include diesel and heating oil, increased by 2.5 million barrels to 117.1 million barrels, or 8 percent more than a year ago.
Over the past four weeks, gasoline demand averaged 9.24 million barrels per day, just a hair above year-ago levels, suggesting higher pump prices may be having an impact on consumption.
Oil prices had risen Tuesday as scientists' predictions about the Atlantic hurricane season and a fire at a Louisiana refinery renewed concerns about potential supply disruptions in the Gulf of Mexico. Hurricane experts said the upcoming season should be an active one, but is unlikely to be as strong as in 2005.
Market participants said the prospect of an active hurricane season is just one of many factors encouraging funds to pour cash into commodities, which are coming off a big dive in an ongoing roller coaster of bargain-hunting and profit-taking.
"Hurricane premium is back as the market is fearful that even one damaging storm in the Atlantic could deliver a knockout blow to energy infrastructure that is still recovering from last year's hurricane season," Phil Flynn, an analyst at Alaron Trading Corp., said in a research note.
Other factors propping up oil prices, which are 40 percent higher than a year ago, include the West's diplomatic impasse with Iran over its nuclear ambitions, violence in Nigeria that has curbed production there and the world's sliver of a supply cushion.
In other Nymex, trading natural gas futures fell 29.4 cents to finish at $5.964 per 1,000 cubic feet.