Oil prices give up gains on growing inventoriesSIOUX FALLS, S.D. (AP) — Oil prices gave up early gains Wednesday after the government reported U.S. stockpiles of crude continue to grow as consumers and business cut back sharply on energy spending.
SIOUX FALLS, S.D. (AP) — Oil prices gave up early gains Wednesday after the government reported U.S. stockpiles of crude continue to grow as consumers and business cut back sharply on energy spending.
The EIA’s report of a 4.7 million barrel jump in inventories for the week ended Feb. 6 surpassed the expectations of analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., who expected a boost of 3.4 million barrels.
Including last week’s build up, crude inventories have increased by more than 30 million barrels in the past five weeks.
Light, sweet crude for March delivery rose 40 cents to $37.95 a barrel on the New York Mercantile Exchange. Prices dipped below $37 after the inventory report. Crude had traded as high as $38.47 earlier.
Gasoline futures jumped, however, after the EIA reported inventories slipped by 2.6 million barrels, or 1.2 percent. Analysts expected stockpiles of the motor fuel to rise by 900,000 barrels.
While crude prices have hovered around $40 per barrel for weeks, the price for retail gasoline has been on a steady climb.
Refiners are slashing production because of a dismal stream of economic news coming out of Washington. Refiners took in 214,000 fewer barrels of crude last week and gasoline production fell, the EIA reported.
That has led to higher prices at the pump.
The national retail average price for a gallon of regular gas rose 1.2 cents to $1.94 a gallon overnight, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 15 cents a gallon above what it was a month ago, but about $2.17 below last July when prices peaked at $4.11 per gallon.
“Weak product demand is forcing these refiners to curtail activities, cutting runs, and that backs crude up into terminals, pipelines and floating storage, etc.,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. “At the same time, it reduces gasoline production.”
Many refiners shut down early this year for regular maintenance due to a growing consensus that millions of lost jobs will translate into less demand for gasoline.
A dismal forecast by the International Energy Agency on Wednesday further highlighted falling demand.
The Paris-based agency lowered its estimate for global oil demand in 2009 by 570,000 barrels to 84.7 million barrels per day because of the worsening economic downturn. The lowered forecast came after the International Monetary Fund predicted the world economy to grow by only 0.5 percent.
“Not only will the two-year contraction in oil demand be the first since the early 1980s, but 2009’s decline will also be the largest since 1982,” the report said.
The IEA forecast also arrived one day after the U.S. Energy Information Administration predicted global oil consumption would decline by 1.2 million barrels a day this year.
Addison Armstrong, director of market research at Tradition Energy, said the latest China customs data show net January crude imports that dropped to the lowest level in 13 months.
“The decreases are the result of the slowing economy, which has caused manufacturing plants to be closed and electricity generation to shrink,” Armstrong wrote in a research note.
Oil had been trading near $40 for about two weeks, underpinned by OPEC production cuts. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global crude supply, said earlier this week it has completed about 80 percent of 4.2 million barrels per day of output cuts announced since September.
In other Nymex trading, gasoline jumped 6 cents to $1.30 a gallon. Heating oil gained 1.6 cents to $1.3177 a gallon, while natural gas for March delivery lost 3.7 cents to almost $4.506 per 1,000 cubic feet.
In London, the March Brent contract rose 16 cents to $44.77 on the ICE Futures exchange.