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Ample supply drives oil below US$77 per barrel

OIL prices dipped yesterday with more evidence that the U.S. is using less energy while oil and gasoline stockpiles continue to grow.

Demand for gasoline slumped during the Thanksgiving week when millions of Americans take to the road and gas sales usually jump.

"Once the holiday was over, people got right back to their cocooning habits, stayed home and didn't do a lot of driving," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

Benchmark crude for January delivery dropped US$1.77, or more than 2 percent, to settle at US$76.60 a barrel on the New York Mercantile Exchange.

In London, Brent crude for January delivery fell US$1.47 to settle at US$77.88 on the ICE Futures exchange.

The Energy Information Administration reported yesterday that oil supplies grew last week, a surprise to most analysts, and that the amount of gasoline in storage surged by 4 million barrels.

The reason is that refineries, which turn crude in to fuel, are cutting back on production with fewer consumers and businesses buying it.

The EIA reported refineries had slowed operations dramatically, running at less than 80 percent capacity for only the second week this year.

Meanwhile, a private report showed the economy shed more jobs last month than expected. The ADP National Employment Report said 169,000 private sector jobs were lost in November. That's less than October but worse than what was expected by economists polled by Thomson Reuters.

The poor economy has sent prices for natural gas plummeting because so many energy intense industries have shut down facilities and cut jobs.

Natural gas hit a 52-week low yesterday and closed down 23.2 cents at US$4.53 per 1,000 cubic feet.

In other Nymex trading in contracts for January delivery, heating oil fell 4.16 cents to settle at US$2.0364 a gallon, and gasoline lost 4.95 cents to settle at US$1.9928 a gallon.


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