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Oil prices fall again as oil supplies rise

(Agencies)
Updated: 2009-08-27 09:53

HOUSTON: The price of oil fell again Wednesday with new government data showing that US crude supplies increased last week, a sign that demand remains weak.

Benchmark crude for October delivery slipped 62 cents to settle at $71.43 a barrel in trading on the New York Mercantile Exchange. In London, Brent crude fell 17 cents to settle at $71.65.

The Energy Department reported Wednesday that US crude stockpiles rose by 200,000 barrels for the week ending August 21. The same report a week ago showed a large and unexpected draw on oil, which sent prices soaring.

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The price for a barrel of oil briefly touched $75 on Tuesday before falling 3 percent for the day - a common occurrence in the volatile energy markets of late.

"Yesterday's surprising sell-off could end up being a one-time curiosity or the start of a rejection of prices that most analysts feel are far too high, given existing supply and demand factors," the energy consultancy Cameron Hanover said in a note to clients Wednesday.

For consumers, it may be anyone's guess where gasoline prices are going to go heading into next year, but heating bills for those who use natural gas could be a bargain. Natural gas futures continue to trade near seven year lows.

US motorists are still enjoying gasoline that is closer to prices from 2005 than what they were paying last summer.

At the pump, retail gas prices fell to a new national average of $2.622 a gallon - $1.05 cheaper than last year.

The government also said Wednesday that US gasoline stockpiles fell by 1.7 million barrels last week.

Meanwhile, the Commerce Department said American manufacturers were rebounding as orders for durable goods jumped last month by the largest amount in two years. The government's Cash for Clunkers program boosted the auto industry as thousands of people traded in older vehicles for new cars.

More activity in the manufacturing sector should help spur energy demand, including consumption of natural gas, which powers a lot of the nation's factories.

Natural gas rose 2.8 cents to settle at $2.91 per 1,000 cubic feet.

In other Nymex trading, gasoline for September delivery fell 2.44 cents to settle at $1.9826 a gallon and heating oil fell less than a penny to settle at $1.852 a gallon.