Oil takes a tumble as Fed declines to offer new stimulus

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Crude oil declined below $79 a barrel to its lowest levels since September on the New York Mercantile Exchange, extending the drop after the Federal Reserve pledged to keep interest rates at a record low through mid-2013.

U.S. benchmark crude for September delivery, West Texas Intermediate, dropped $2.01 to $79.30 on the New York Mercantile Exchange. That was the commodity’s lowest settlement since Sept. 29, 2010. Futures have fallen 17% so far this month and are now down 13% for the year.

European benchmark Brent North Sea oil for September delivery dropped $2.35, or 2.3%, to $101.39 a barrel on the ICE Futures exchange in London. Earlier, it had fallen as much as $5, to $98.74, briefly drifting below $100 for the first time since Feb. 8.

Phil Flynn, an analyst at PFGBest Research, said ‘the market was hoping it would see some more Fed stimulus.’

Flynn added, ‘The Fed didn’t need to tell us they were keeping rates low. We already know that. There is a little bit of disappointment about that. Add to that the numerous reports from sources like the Energy Department on lower oil demand and we have another decline. Oil can be a safe haven, but only if you believe the global economy is going to move up reasonably and steadily.’

Retail gasoline prices continued to decline, falling to a national average of $3.652 for a gallon of regular from $3.703 a week ago, according to the AAA Fuel Gauge Report. In California, the average price of a gallon of regular gasoline was $3.783, down from $3.816 a week ago.

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-- Ronald D. White

Chart: The 12-month rolling average for the price of regular unleaded gasoline in California and in the U.S. Credit: AAA Fuel Gauge Report