Prices fall as oil supplies grow
NEW YORK — A “build” and a “Twist” knocked oil prices to the floor Wednesday.
In the morning, the government announced a surprise increase, or build, in U.S. oil supplies. That told investors that America has a bounty of crude and less need to import more from foreign countries. Then the Federal Reserve extended an interest-rate reduction program known as Operation Twist, but declined to take more aggressive steps to boost the economy.
Together, they sent the price of oil to a nine-month low.
Benchmark U.S. crude dropped $2.23, or 2.7 percent, to end the day at $81.80 per barrel in New York. That’s the lowest level since October. Brent crude, which is used to price much of the oil imported into the U.S., lost $3.07 to finish at $92.69 per barrel in London. That’s Brent’s lowest finish since December 2010.
Wednesday’s drop was among the biggest in a nearly two-month swoon that has slashed 23 percent off the price of oil.
The Energy Information Administration said oil supplies grew by 2.9 million barrels last week. That surprised analysts who had expected a decline of 600,000 barrels. Oil supplies have risen this year to the highest level since 1990, thanks to a boom in North American production.
“The U.S. is flush with oil right now,” independent analyst and trader Stephen Schork said. “And if you factor in the economic mess in Europe, slower economic growth in China, and probably overproduction from the Saudis in preparation for the Iranian oil embargo, the world has a comfortable supply” of oil.
Gasoline prices have tumbled by nearly 45 cents per gallon, on average, since the first week of April. The national average fell by a penny to $3.487 per gallon Wednesday, according to auto club AAA, Wright Express and Oil Price Information Service.
In other futures trading, wholesale gasoline lost 5.13 cents to finish at $2.5902 per gallon.
Natural gas lost 2.8 cents to end at $2.517 per 1,000 cubic feet.