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Oil falls as economists warn of high prices
Source: Agencies |
March 11, 2011, Friday
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OIL traders focused on weak economic reports from the US and China yesterday, while showing they still have a hair trigger mentality when it comes to events in the Middle East.
Benchmark West Texas Intermediate for April delivery eventually settled down US$1.68, or 1.6 percent, to US$102.70 a barrel on the New York Mercantile Exchange.
Earlier, prices tumbled on signs that the recent surge in fuel prices is slowing economic growth. So far this year, the US is consuming more gasoline despite price increases of 50 cents per gallon in just three months. But Americans may finally be pulling back, experts said.
Motorists recently have started to buy fewer gallons of gasoline, according to SpendingPulse, a research firm that tracks retail spending. Consumers were buying more in February, and that trend was supposed to continue toward the summer.
The rapid increase in gas prices "blew through" everyone's comfort level, SpendingPulse Vice President Michael McNamara said. He called it the first real sign that consumers are rearranging their habits to conserve gas.
Economist Michael Lynch said consumers will cut back on driving even more in coming months if oil remains above US$100 per barrel.
"We're past the point of, 'Oh, it's only going to be up for a few days,'" Lynch said. He observed that people are "modifying their vacation plans as we get closer to the summer."
About 7.3 million barrels of Saudi crude gets shipped every day to refineries, satisfying about 8 percent of global demand. The kingdom also is one of only a handful of countries that can increase production enough to meet unexpected increases in demand.
Still, the decline in oil for the day showed the market is concerned about the impact of high prices on the global economy. Prices fell as low as US$100.62 before rebounding on the Saudi news.
And Oil prices helped raise the US trade deficit to a seven-month high in January, when crude prices were still only US$87.50 a barrel.
Oil jumped from around US$84 in mid-February to above US$105 earlier this week.
"When you've risen as quickly as we have, there's always going to be a risk of a big drop when you hear stories that say the world isn't as wonderful as you think," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Oil company shares dropped. Exxon Mobil Corp., Chevron Corp., BP PLC, ConocoPhillips, Occidental Petroleum Corp., and Royal Dutch Shell all fell at least 3 percent.
At the pump, retail gasoline prices added less than a penny yesterday, rising to s national average of US$3.529 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 41.2 cents more expensive than last month and 76.1 cents higher than the same time last year.
SpendingPulse said that gasoline consumption has dropped in the week ended March 4 compared with last year. Demand fell by 1 percent on the West Coast, 1.6 percent in New England and 0.3 percent along the Gulf Coast.
In London, Brent crude lost 51 cents to settle at US$115.43 per barrel on the ICE Futures Exchange.
Natural gas fell 10 cents to settle at US$3.83 per 1,000 cubic feet after the government said US supplies are still higher than last year despite a drop in price. US inventories have been growing as new technologies allow companies to tap underground shale deposits.
In other Nymex trading for April contracts, heating oil fell 2.58 cents to settle at US$3.0449 per gallon and gasoline dropped less than a penny to settle at US$3.0196 per gallon.
Benchmark West Texas Intermediate for April delivery eventually settled down US$1.68, or 1.6 percent, to US$102.70 a barrel on the New York Mercantile Exchange.
Earlier, prices tumbled on signs that the recent surge in fuel prices is slowing economic growth. So far this year, the US is consuming more gasoline despite price increases of 50 cents per gallon in just three months. But Americans may finally be pulling back, experts said.
Motorists recently have started to buy fewer gallons of gasoline, according to SpendingPulse, a research firm that tracks retail spending. Consumers were buying more in February, and that trend was supposed to continue toward the summer.
The rapid increase in gas prices "blew through" everyone's comfort level, SpendingPulse Vice President Michael McNamara said. He called it the first real sign that consumers are rearranging their habits to conserve gas.
Economist Michael Lynch said consumers will cut back on driving even more in coming months if oil remains above US$100 per barrel.
"We're past the point of, 'Oh, it's only going to be up for a few days,'" Lynch said. He observed that people are "modifying their vacation plans as we get closer to the summer."
About 7.3 million barrels of Saudi crude gets shipped every day to refineries, satisfying about 8 percent of global demand. The kingdom also is one of only a handful of countries that can increase production enough to meet unexpected increases in demand.
Still, the decline in oil for the day showed the market is concerned about the impact of high prices on the global economy. Prices fell as low as US$100.62 before rebounding on the Saudi news.
And Oil prices helped raise the US trade deficit to a seven-month high in January, when crude prices were still only US$87.50 a barrel.
Oil jumped from around US$84 in mid-February to above US$105 earlier this week.
"When you've risen as quickly as we have, there's always going to be a risk of a big drop when you hear stories that say the world isn't as wonderful as you think," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Oil company shares dropped. Exxon Mobil Corp., Chevron Corp., BP PLC, ConocoPhillips, Occidental Petroleum Corp., and Royal Dutch Shell all fell at least 3 percent.
At the pump, retail gasoline prices added less than a penny yesterday, rising to s national average of US$3.529 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 41.2 cents more expensive than last month and 76.1 cents higher than the same time last year.
SpendingPulse said that gasoline consumption has dropped in the week ended March 4 compared with last year. Demand fell by 1 percent on the West Coast, 1.6 percent in New England and 0.3 percent along the Gulf Coast.
In London, Brent crude lost 51 cents to settle at US$115.43 per barrel on the ICE Futures Exchange.
Natural gas fell 10 cents to settle at US$3.83 per 1,000 cubic feet after the government said US supplies are still higher than last year despite a drop in price. US inventories have been growing as new technologies allow companies to tap underground shale deposits.
In other Nymex trading for April contracts, heating oil fell 2.58 cents to settle at US$3.0449 per gallon and gasoline dropped less than a penny to settle at US$3.0196 per gallon.
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