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Oil plunges, erasing 2011 gains; gasoline prices ease [Updated]

August 4, 2011 | 10:30 am

Oil prices fell to their lowest levels since February, erasing the year's gains for the commodity, amid rising concerns that the U.S. economy is slowing.

CA_grph The U.S. benchmark for crude oil trading -- West Texas Intermediate -- was down $4.19, or 4.6%, to $87.74 a barrel in midday trading on the New York Mercantile Exchange. Earlier in the day, the price dropped as low as $87.25, the lowest since Feb. 22. That was down sharply from the year's trading day high so far of $114.83 a barrel reached on May 2.

"It's a combination of things. You've got the dollar rallying. You've got banks talking about charging customers for making deposits because their model is broken. The yield environment is so low that it's going to cost them to take deposits. I thought we were starting to turn the corner but there are real fears now about a second recession," said John Kilduff, founding partner at Again Capital, an energy hedge fund in New York.

The Bank of New York is charging some of its institutional customers a fee to hold their cash. Most of its customers are large pension funds and money market funds. It does not deal directly with consumers.

The European benchmark for crude, Brent North Sea, fell $3.66 to $109.57 a barrel on the ICE Futures Exchange in London.

Some positive news about the economy would be required to shore up confidence, but all eyes were now on the next set of unemployment numbers and what they will show, Kilduff said, adding, "The fear is that they are going to show zero job growth."

The stock market was also plunging. Phil Flynn, an analyst with PFGBest Research in Chicago, said, "Investors are fleeing to cash. The mood of this market is very bad. It all looks ugly at the moment."

On a positive note, oil's decline seemed to have stopped the recent upswing in retail gasoline prices. In California, the average price of a gallon of regular was $3.815, down 0.2 cents from last week, according to the AAA Fuel Gauge Report.

The gain in prices around the U.S. has also stalled, at least for the moment. The national average for a gallon of regular was $3.703, down from $3.706 last week. The AAA's average come from data compiled by the Oil Price Information Service and by Wright Express.

California, a state that is normally very tight on supplies of refined fuels, was in the rare position of having more than it needed to meet its declining demand levels, according to Bob van der Valk, a fuel price analyst. There seemed to be few options for moving it around to places of higher demand, he said.

"The West Coast has an oversupply of gasoline and has problems obtaining tanker ships to move product around to the East Coast," Van der Valk said.

[Updated 12:27 p.m. pdt, 8/04/11: U.S. crude for September delivery settled at $86.63 a barrel on the New York Mercantile Exchange, sliding $5.30, or nearly 5.8%, after hitting $86.04 during the trading day, the lowest midday point since the Feb. 18.]


Dow plunges 350 points on global economic fears

-- Ronald D. White

Chart: The AAA's rolling 12-month average for regular gasoline prices in California and nationally. Credit: AAA Fuel Gauge Report

Movie Projector: 'Apes' will rise above 'Change-Up' at box office


After this weekend's box-office receipts are tallied, “The Change-Up” will wish it could trade places with “Rise of the Planet of the Apes.”

A prequel to the 1968 cult classic that shows how simians took over the Earth, "Apes" is expected to swing to the top of the box office with a pretty good start of around $35 million, according to those who have seen pre-release audience surveys. "The Change-Up," an R-rated comedy about two men who accidentally switch lives, is only expected to bring in a modest sum of between $13 and $15 million.

"Apes" is the first movie produced by Peter Chernin, the former president of 20th Century Fox parent company News Corp. who left his job as Rupert Murdoch's top lieutenant in 2009 to form his own entertainment company. The film, which stars James Franco and Andy Serkis, was financed by Fox and partners Dune Capital Management and Ingenious Media for $93 million.

It has so far received overwhelmingly positive reviews. On Thursday morning it had a 83% fresh rating on Rotten Tomatoes and is generating interest largely among men.

The original series of five "Apes" films concluded in 1973 but was restarted in 2001 with a Tim Burton-directed version of "Planet of the Apes." That movie was critically panned but grossed $362.2 million worldwide.

"Rise of the Planet of the Apes" will open overseas in 26 foreign markets this weekend, including Russia and Australia.

"The Change-Up," which stars Ryan Reynolds and Jason Bateman, is the latest raunchfest to hit theaters this summer. But compared with other R-rated comedies that have found success at the box office in recent months, "The Change-Up" had a higher-than-average budget and is headed for a lower-than-average opening. Universal Pictures and Relativity Media spent about $52 million to produce the picture.

"Bad Teacher" and "Horrible Bosses" -- which also stars Bateman -- had production costs of $19 million and $37 million, respectively, and each opened to about $30 million.

"The Change-Up" has so far garnered largely negative critical response and is generating most of its buzz among young females -- perhaps due to its hunky star Reynolds.

Meanwhile, many in the industry will be watching to see how "Cowboys & Aliens" holds up on its second weekend in theaters. After bringing in a disappointing $36.4 million upon its debut, the sci-fi western will need very strong word-of-mouth if it hopes to make a profit on its $163-million production budget. DreamWorks SKG covered 50% of that cost, with Universal Pictures and Relativity Media equally splitting the other half. The three studios share the proceeds, or more likely the losses, based on their respective investments.

In a limited release, Magnolia Pictures will open "Magic Trip," a documentary about author Ken Kesey's 1964 drug-laden cross-country road trip, in three theaters in California and one in New York.

Which film will be No. 1 at the box office this weekend?


‘Rise of the Planet of the Apes’: Andy Serkis hails Caesar

James Franco explains how he really feels about 'Apes' [Video]

Hollywood waits to see how Peter Chernin's new venture will fare

-- Amy Kaufman

Photo: Apes tie up traffic in "Rise of the Planet of the Apes." Credit: 20th Century Fox