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Oil prices fall again as oil supplies rise

THE price of oil fell again yesterday with new government data showing that U.S. crude supplies increased last week, a sign that demand remains weak.

Benchmark crude for October delivery slipped 62 cents to settle at US$71.43 a barrel in trading on the New York Mercantile Exchange. In London, Brent crude fell 17 cents to settle at US$71.65.

The Energy Department reported yesterday that U.S. crude stockpiles rose by 200,000 barrels for the week ending Aug. 21. The same report a week ago showed a large and unexpected draw on oil, which sent prices soaring.

The price for a barrel of oil briefly touched US$75 on Tuesday before falling 3 percent for the day - a common occurrence in the volatile energy markets of late.

"Yesterday's surprising sell-off could end up being a one-time curiosity or the start of a rejection of prices that most analysts feel are far too high, given existing supply and demand factors," the energy consultancy Cameron Hanover said in a note to clients yesterday.

For consumers, it may be anyone's guess where gasoline prices are going to go heading into next year, but heating bills for those who use natural gas could be a bargain. Natural gas futures continue to trade near seven year lows.

U.S. motorists are still enjoying gasoline that is closer to prices from 2005 than what they were paying last summer.

At the pump, retail gas prices fell to a new national average of US$2.622 a gallon - US$1.05 cheaper than last year.

The government also said yesterday that U.S. gasoline stockpiles fell by 1.7 million barrels last week.

Meanwhile, the Commerce Department said American manufacturers were rebounding as orders for durable goods jumped last month by the largest amount in two years. The government's Cash for Clunkers program boosted the auto industry as thousands of people traded in older vehicles for new cars.

More activity in the manufacturing sector should help spur energy demand, including consumption of natural gas, which powers a lot of the nation's factories.

Natural gas fell 2.8 cents to settle at US$2.882 per 1,000 cubic feet.

In other Nymex trading, gasoline for September delivery fell 2.44 cents to settle at US$1.9826 a gallon and heating oil fell less than a penny to settle at US$1.852 a gallon.


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