Light, sweet crude for June was down 70 cents at $48.80 in early trade on the New York Mercantile Exchange. June gasoline shed 0.44 cent to $1.455 a gallon, while June heating oil added 0.15 cent to $1.4375 a gallon.
"Expectations are that both crude and product stocks are going to rise -- that means even higher stocks that already are very high" in the world's greatest energy-consuming nation, said analyst Ehsan Ul-Haq of Vienna's PVM energy consultants. "Prices are going down all over the world, but most severely in the West."
The latest petroleum supply snapshot from the U.S. Department of Energy showed a 2.6 million barrel increase in crude oil last week, bringing the nation's inventories to 327 million barrels, or 9% above year ago levels. The supply of gasoline grew by 2.2 million barrels to 213.5 million barrels, or 6% above year ago levels.
The downward pressure on prices also has to do with slower economic growth in the U.S. The U.S. Federal Reserve raised interest rates1 Tuesday to curb spending as overall consumer prices spiked by 0.6% in March, driven by expensive gasoline and energy products. The move could slow growth in the world's largest economy, reducing demand for oil, traders said.
"One reason oil prices got hit hard last week was the barrage of weaker-than-expected macroeconomic reports," said Phil Flynn, an analyst with Chicago-based Alaron Futures and
Options, on the firm's Web site. "Traders started thinking it would be difficult for oil demand to remain strong if the economy softened."
Crude supplies in the U.S. have risen in recent weeks, but concern remains over the country's gasoline stocks ahead of the summer driving season. Although crude futures have fallen by more than $9 since their all-time high of $58.28 in early April, prices remain around 30% higher than a year ago.
On Tuesday, the Paris-based International Energy Agency urged nations to diversify energy supplies and reiterated its warning that persistently high oil prices are "a drag on economic activity and growth." The IEA said, "Today's prices demand actions to stimulate and diversify energy supply and curb demand."
Copyright © 2005 Associated Press