Oil tumbles as U.S. supplies rise and demand falls
Energy prices led a renewed plunge in commodities Wednesday after government data showed rising U.S. crude oil and gasoline inventories -- and weaker demand.
A fresh surge in the dollar also knocked many raw materials prices for a loop by raising the cost of commodities for foreign buyers.
Near-term crude futures in New York were down $5.67, or 5.4%, to $98.21 a barrel at about 11:30 a.m. PDT, the second decline below the $100 mark in four trading sessions.
Gasoline futures plunged 25.38 cents, or 7.5%, to $3.12 a gallon.
Trading in oil and gasoline futures was briefly halted when the slide in gas prices reached 25 cents, triggering a preset circuit breaker. That circuit breaker was reset and trading resumed.
The government reported that U.S. oil inventories rose 3.78 million barrels last week to 370.3 million, a two-year high. The bigger surprise was that gasoline inventories rose 1.28 million barrels to 205.8 million, the first increase since mid-February.
While gasoline supplies increased, U.S. demand continued to slide. With gasoline averaging near $4 a gallon nationwide, and $4.25 in California, weaker demand is "evidence that high prices are having an impact on consumption," said Andrew Lebow, an analyst at MF Global Inc. in New York.
Gasoline futures prices tumbled despite worries that flooding from the Mississippi River could damage key refineries in the South. Prices had surged Monday and Tuesday on those concerns, and "that's not over yet," Lebow said.
Meanwhile, the dollar jumped against the euro as fears again mounted that Greece will end up defaulting on its debt, potentially triggering a new financial crisis in Europe. The euro slid to a six-week low of $1.420 from $1.441 on Tuesday.
The dollar’s gains pounded gold and silver, which had benefited from the greenback’s slide over the last eight months as investors sought an alternative to paper currencies. Silver futures plummeted $2.97, or 7.7%, to $35.51 an ounce in New York. Gold fell $15.50, or 1%, to $1,501.10 an ounce.
The Thomson Reuters/Jefferies CRB index of 19 major commodities was down 3% to 338.14.
Raw materials markets were slammed last week, driving the CRB index down 9%, as some investors rushed to take profits after the surge in prices since August. Commodities stabilized on Monday and Tuesday as selling abated, but Wednesday’s slump may unnerve more investors who sat through last week’s dive, hoping prices had bottomed.
Crude oil futures reached a 31-month high of $113.93 a barrel on April 29.
-- Tom Petruno