Crude oil prices fell more than $2 a barrel Thursday as thwarted airplane attacks led many carriers to cancel flights, which could mean dampened jet fuel demand and weaker consumer confidence.
Prices also deflated after Shell announced it was bringing back 180,000 barrels of daily oil production in Nigeria. Goldman Sachs, meanwhile, said it would end its participation in the New York Harbor unleaded gasoline contract, as expected, but wouldn't roll its money into another contact.
Gasoline prices fell 9 percent to a four-month low, as big funds bailed out of the contract.
On Thursday, British authorities said they had stopped a terrorist plot to blow up several aircraft in flight between the United States and the United Kingdom.
European carriers canceled flights to Britain, where airports were experiencing massive delays. There were delays in the United States, too, amid heightened security.
Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York, said the news "revives fears, and causes people to cut travel plans, which has a contracting effect on petroleum demand."
Light, sweet crude for September delivery dropped $2.35, or more than 3 percent, to settle at $74 a barrel on the New York Mercantile Exchange — erasing all of this week's gains, and more. It was the lowest settlement price since July 28.
Gasoline futures dropped 18.33 cents to finish at $1.9889 a gallon, the lowest it's settled since finishing at $1.9766 on April 7.
Heating oil futures fell 8.13 cents to settle at $2.0250 a gallon.
Brent crude on London's ICE futures exchange fell $2 to settle at $75.28 a barrel.
On Thursday, a Nigerian pipeline run by Royal Dutch Shell PLC was back in service, according to Dow Jones Newswires. Shell had blocked the 180,000 barrel-a-day pipeline in late July after an unexplained leak.
Southern Nigeria, where most of the nation's crude is pumped, has seen violence against the petroleum industry rising. Kidnappings and attacks have forced a cut of about 20 percent of Nigeria's usual 2.5 million barrel daily production.
Also Thursday, Goldman Sachs announced it would not be rolling over its remaining positions in the New York Harbor Unleaded Gasoline contract, which is being phased out because the U.S. government has labeled ingredient MTBE as a pollutant.
"The big players are getting out of it ... with Goldman Sachs getting out, it's the final nail in the coffin," said Phil Flynn, Alaron Trading Corp. analyst, noting that big funds are increasingly trading Nymex's more environmentally friendly gasoline contract, the Reformulated Gasoline Blendstock for Oxygen Blending futures contract.
Prices continued to be affected by supply disruptions in Nigeria due to civil unrest; BP's Alaskan pipeline being shut down because of corrosion; the standoff between the United Nations and Iran over the nuclear program of OPEC's No. 2 oil producer; and fighting in the Middle East between Israel and Hezbollah.
BP PLC announced late Sunday that it was shutting down 400,000 barrels of daily oil production — about two-thirds of which belongs to ConocoPhillips and Exxon Mobil Corp. — at Prudhoe Bay in Alaska. The company said, however, that it would decide Friday if it can maintain half of its normal production during repairs.
The average U.S. retail gasoline price rose a couple cents after BP's announcement, but has hovered around $3.036 a gallon for regular unleaded since then.
Unleaded gasoline prices on the West Coast, where refiners get about 30 percent of their oil from Alaska, have risen more than in the rest of the country, but the bigger jumps have been in diesel fuel. In Washington and Oregon, diesel prices were at the states' record highs as of Thursday morning, at $3.347 a gallon and $3.245 a gallon, respectively.
But wholesale gasoline prices, or the price retailers pay for gasoline, fell sharply Thursday, and are now about 30 cents below their peak in August, noted Tom Kloza, chief oil analyst at the Oil Pricing Information Service. Diesel prices are also falling, but not as fast as gasoline. In theory, if these price movements continue, there should be some relief at the pump.
Natural gas futures fell 12.2 cents to settle at $7.529 per 1,000 cubic feet. The Energy Information Administration reported Thursday that 12 billion cubic feet of natural gas was removed from storage last week, when scorching temperatures caused U.S. power use to hit record levels.