NEW YORK – Oil prices settled lower on Wednesday as the government said crude supplies shrank less than analysts expected and stock markets showed only modest gains after Tuesday's rally.
Benchmark crude lost 35 cents to settle at $75.42 a barrel on the New York Mercantile Exchange. The contract dropped as low as $73.83 before recovering most of its losses.
Gasoline pump prices dropped by another half cent to a national average of $2.737 for a gallon of unleaded regular. That's down 4.3 cents from a week ago and 10.3 cents above a year ago.
In its weekly report the Energy Department's Energy Information Administration said crude supplies fell last week by 800,000 barrels, considerably less than the drop of 2.25 million barrels that analysts forecast in a survey by Platts, the energy information arm of McGraw-Hill Cos. Gasoline stocks were virtually unchanged and supplies of distillate fuels — like diesel and heating oil — rose by 1.1 million barrels, about as much as expected.
U.S. refineries ran at a surprising 90 percent of total capacity, a rise of 1.9 percentage points from the prior week. Analysts expected capacity to slip to 87 percent.
"Refiners have a difficult situation," energy consultants Cameron Hanover said. "They do not want to give up hard-won long-term contracts with suppliers, knowing that a time will come when they will want those contracts. But, they are not keen to build either crude oil stocks or refined products stocks from existing levels. The problem is, though, that demand is not strong enough to avoid one or the other."
Many analysts have been warning that the current oversupply of crude combined with weak demand make it hard to justify oil prices above $70 per barrel.
"Continued investor interest is the only factor working against a sharper fall in prices at present," said a report from Commerzbank in Frankfurt.
Stock prices rose slightly in light trading. The Dow Jones Industrial Average closed up about 10 points. The NASDAQ and the S&P 500 finished up a little as well. Oil traders keep an eye on stock prices as a broad indicator of which way the economy may be heading.
In other Nymex trading in September contracts, heating oil fell 0.1 cent to settle at $2.0249 a gallon, while gasoline added 0.8 cent to settle at $1.9612. Natural gas lost 2.8 cents to settle at $4.239 per 1,000 cubic feet.
In London, Brent crude fell 46 cents to settle at $76.47 a barrel on the ICE Futures exchange.