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Energy prices slide on surprise jump in gas supply

CRUDE oil and other energy prices slumped yesterday after the Energy Department reported a higher than expected jump in U.S. gasoline stockpiles.

Benchmark crude for December delivery fell US$2.09, more than 2 percent, to settle at US$77.46 a barrel on the New York Mercantile Exchange.

Retail gasoline prices have ticked upward since the middle of the month, around the same time that crude futures rose above US$75 per barrel for the first time this year.

The rising cost of crude and ensuing production cuts by U.S. refiners who are also stung by those prices has helped push gasoline prices higher for 15 days in a row.

The report by the Energy Information Administration yesterday seemed to wash away fears of tightening supply, at least for now.

Gasoline stocks rose by nearly 2 million barrels though many energy analysts had expected supplies to fall for a third week in a row.

Gasoline futures on the New York Mercantile Exchange fell 3 percent almost immediately.

U.S. refiners are buying less crude to make fuel because demand from airlines, trucking companies and motorists remains relatively week.

Diesel and jet fuel demand are both down over the past four weeks compared with last year, the government reported yesterday.

Unable to pass off cost increase for the crude they must buy, refiners have shut down operations and production is currently at levels more common in the aftermath of a hurricane.

Even with energy demand low, the falling value of the dollar is driving crude futures higher. When the dollar falls, investors holding euros or other relatively strong currencies can buy more crude because it's bought and sold in dollars.

The dollar gained strength on yesterday, and crude prices fell.

"Even with supply underlying the market, the current interest for energy swirls around the economy and the dollar," said PFGBest analyst Phil Flynn.

In other Nymex trading, heating oil tumbled 5.82 cents to settle at US$1.9969 a gallon. Gasoline for November delivery also fell sharply, 8.41 cents to settle at US$1.9864 a gallon. Natural gas for November delivery fell 27 cents to settle at US$4.289 per 1,000 cubic feet.

In London, Brent crude for December delivery fell US$2.06 to settle at US$75.86 on the ICE Futures exchange.


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