Oil tumbles on new US inventory report
NEW YORK (AP) — Oil prices slumped Wednesday on a government report showing that crude and gasoline inventories are bulging with surplus supply.
Benchmark crude for April delivery fell $1.37 to $47.79 a barrel on the New York Mercantile Exchange. The Nymex April contract will expire Friday.
In London, Brent prices fell $1.45 to $46.79 on the ICE Futures exchange.
The Energy Information Agency reported crude inventories rose 2 million barrels for the week ended March 13, in line with analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.
However, gasoline stocks surged by 3.2 million barrels, which shocked analysts who had expected a draw down of 2.1 million barrels.
“This is throwing a little cold water on what people have been saying” about a rebound in oil prices, said Andrew Lebow, senior vice president and broker at MF Global in New York.
Prices have recently been bolstered by renewed optimism in stock markets, which some oil traders use as a barometer of overall investor sentiment. Still, months of massive layoffs, falling consumer demand and weak corporate profits have left some traders wary that the drop in crude demand reached a bottom.
“We’re seeing a bit of a sell-off after such a strong run-up” in oil prices, said Michael Lynch, president of Strategic Energy & Economic Research.
The Commerce Department said Wednesday the deficit in the broadest measure of U.S. trade fell sharply in 2008 for the second consecutive year. Economists expect imports to shrink even more as the recession cuts into consumer buying power. The global recession is also cutting into U.S. exports.
The World Bank said plunging exports continue to harm China’s economy and cut its forecast of China’s 2009 growth from 7.5 percent to 6.5 percent. Still, World Bank economists said they were confident in Beijing’s ability to expand the world’s third-largest economy despite the global turmoil.
“We see China as a relative bright spot in a rather gloomy global economic picture,” said David Dollar, the bank’s country director for China.
In Britain, the country’s unemployment rate rose to its highest level in 12 years. The Office for National Statistics said more than 2 million people claimed unemployment benefits in January.
Meanwhile, OPEC has been slashing production in hopes of drawing down a global surplus of crude. With oil trading well below OPEC’s comfort level, the national budgets of some member countries are under strain.
“Harmfully low prices are creating a damaging ripple effect, with diminished oil sector investments threatening the availability of much-needed future supplies,” Saudi Arabian oil minister Ali al-Naimi said.
On Wednesday, Iranian Oil Minister Gholam Hossein Nozari said that a plunge in crude prices has forced his country to pull money from other parts of its budget to support the oil industry.
Nozari, who spoke at an OPEC meeting in Vienna, told The Associated Press that while some fields were still profitable at current prices, production at others had to be subsidized to maintain output at over 4 million barrels a day.
Falling oil prices also forced Iranian President Mahmoud Ahmadinejad to propose an unpopular tax hike and plans to scrap costly state subsidies for fuel, water and electricity.
The Organization of the Petroleum Exporting Countries decided last week against shutting down production more than the previously announced cut of 4.2 million barrels per day. Instead, leaders said they’ll rein in wayward members of the 12-nation group and make sure everyone is cutting as much as promised.
Crude imports actually rose by 59,000 barrels compared with the previous week, according to the EIA.
Gas prices rose a penny overnight to a national average of $1.92 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gas is 4.5 cents cheaper than a month ago and $1.36 cheaper than a year ago.
In other Nymex trading, gasoline for April delivery tumbled 7 cents to $1.3535 a gallon, while heating oil dropped 0.267 cent to $1.248 a gallon. Natural gas for April delivery fell 9.3 cents to $3.719 per 1,000 cubic feet.
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