Oil prices tumbled below $69 per barrel today on a government report showing demand for energy remains weak.
Benchmark crude for November delivery fell nearly 4 percent, or $2.78, to $68.98 a barrel on the New York Mercantile Exchange. The contract added $1.83 a barrel to settle at $71.76 on Tuesday.
Crude supplies for the week ended Friday grew by 2.8 million barrels, according to the Energy Information Administration. Analysts were expecting a 2.25 million-barrel drop, according to a survey by Platts, the energy information arm of McGraw-Hills Cos.
The same report showed much bigger than expected increases in supplies of gasoline and distillates used for heating oil and diesel fuel, sending prices of both products sharply lower as well.
“The demand isn’t there and there is plenty of product on the market,” oil analyst and trader Stephen Schork said after the release of the report.
Prices may grow more volatile later Wednesday during a Federal Reserve meeting later Wednesday.
Even with supplies more than ample, oil prices have remained high partly because of the weakening U.S. dollar.
Crude is priced in dollars so it becomes cheaper when the dollar falls. The dollar is at a nearly one-year low against the euro.
To combat the worst recession since the 1930s, the Federal Reserve has kept interest rates at a record low — near zero — and started an assortment of programs designed to encourage borrowing. Critics have complained that the Fed appears to be printing money to pay for the government’s spending binge, and that hurts the dollar.
The Fed is expected to keep interest rates the same, but traders will be watching for hints that it may begin to rein in programs designed to support the economy.
Prices at the pump fell 0.4 cents overnight to $2.54 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 8.6 cents below levels of a month ago and $1.186 down from year-ago levels.
In other Nymex trading, gasoline for October delivery fell about 8 cents to $1.70 a gallon, and heating oil lost 5.4 cents to $1.7585 a gallon. Natural gas rose 14.4 cents to $3.753 per 1,000 cubic feet.
In London, Brent crude tumbled $2.89 to $67.64 on the ICE Futures exchange. (AP)
