Domestic commercial oil stocks reached more than a three-year high in government data this week, weighing on prices. And the dollar's leap to a high for the year against the euro Thursday on April retail-sales data further drove the decline.
"Finally, after a year and a half, the laws of supply and demand have not been repealed," said William Ferer, president and director of research for W.H. Reaves & Co., an investment- management firm in Jersey City, N.J. "Short-term inventories have continued to build and interruptions to that have been relatively few."
Commercial crude inventories rose to nearly 330 million barrels last week, according to data released Wednesday by the federal Energy Information Administration, the statistics branch of the U.S. Department of Energy. The data followed a report from the Paris-based International Energy Agency, which posted a marked slowing of Chinese demand for oil in the first quarter. Traders have closely watched all data on China, which has had an increased demand for oil that helped drive oil prices up to record levels.
Benchmark light, sweet crude futures for June fell as much as $1.90 to $48.55 a barrel -- a fresh low for the week -- on the New York Mercantile Exchange. The contract ended overnight trade at $49.62 a barrel. It gave up $1.62 during Wednesday's session.
Prior to the open, some traders had expected crude's selloff to stall around $50 a barrel, as it has in past weeks. But Mr. Ferer said bearishness over ample petroleum supplies may have boiled over
for now.
"People want to test $49," he said. "That's the bull's-eye right now."
In London, Brent crude for June dropped as much as $1.37 to $48.70 a barrel in electronic trade on the International Petroleum Exchange. The contract has fallen to its lowest level in at least 10 weeks.
Nymex gasoline futures for June fell as much as 4.40 cents to $1.4380 a gallon, while heating-oil futures for the same month fell as much as 2.96 cents to $1.3735 a gallon.
Although gasoline inventories shrank last week in regions east of the Rocky Mountains, traders said cash-market demand for gasoline slackened in past weeks, softening gasoline futures prices.
Despite weaker prices, concerns remain about spare oil-production capacity late this year and the U.S. peak demand summer-driving season. That, and jitters about lower-than-usual U.S. refinery operating rates drove oil prices above $52 earlier this week.