Updated from 2:19 p.m. EDT
Oil prices slid Wednesday amid another selloff in commodities, after a government report showed gasoline supplies rose last week, allaying fears of a summer shortage.
Crude for July delivery closed down $1.90 to $69.86 a barrel on Nymex. Gasoline dipped 9 cents to $2.01 a gallon. The declines came as other speculative favorites like gold, copper and silver all experienced another session of red ink.
Energy shares were under pressure, with the Amex Oil Index and the Philadelphia Oil Service Index were declining up to 2%.
Gasoline inventories surged 2.1 million barrels, the Energy Department said, almost double analysts' expectations, thanks to record high imports. Last week, imports hit 1.6 million barrels, the second-highest weekly number on record. Inventories are at 208.5 million barrels, or about 3% below a year ago.
Higher gasoline prices have kept consumption sluggish, with demand rising less than 1% over the past four weeks. Gasoline prices have shed 1.2% in the past month, dropping to an average of $2.88 a gallon last week.
Refining capacity remained essentially unchanged last week at 89.7%. Last year, run rates were just over 94%. Traders had expected refiners to crank up capacity ahead of the Memorial Day weekend, which kicks off the peak summer driving season. This year, refiners have had a longer maintenance schedule than usual as they switched over to ethanol and cleaner blends of gasoline for the summer.
"Until refiners emerge from their maintenance work and resume full production, gasoline prices and markets will remain volatile -- we cannot import our way out of this mess," said Rakesh Shankar, an energy analyst at Economy.com in West Chester, Pa.
Despite lackluster refining run-rates, inventories of distillates, which include refined products like heating oil and diesel, soared by 2.5 million barrels to 117.1 million barrels, or more than 8% above last year. Stepped-up production was behind the increase.
Heating oil prices lost 6 cents to $1.94 a gallon.
With higher production comes lower inventories of crude, which dropped by 3 million barrels, or more than three times analysts' expectations. Lower crude imports also contributed to part of the decline. Inventories are nearly 4% over last year, or 343.9 million barrels. Crude is processed into products like jet fuel and diesel.
The U.S. Energy Department released its weekly petroleum supply report at 10:30 a.m. EDT Wednesday. Traders eye it closely because it gives a good snapshot of the country's demand and supplies of energy.
High supply levels canceled out forecasts of hot weather and sent natural gas down 29 cents to $5.96 per million British thermal units. The National Weather Service's Climate Prediction Center expects temperatures to soar into the 80s and 90s from May 28 to June 6 in parts of the Midwest. In Chicago, for instance, temperatures will touch 85 degrees, up from a more typical 72 degrees.
Mild winter temperatures and lower heating demand sent natural gas stockpiles up 31% over last year to 2 trillion cubic feet. Analysts are expecting another boost to inventories of 90 million cubic feet in the Energy Department's report on Thursday.
In trading Wednesday, energy shares were falling along with crude prices. Among oil service companies on the Philadelphia Oil Service Index,
were posting the largest declines from 3% to 4%.
were leading the declines, off 2%.
( REP) and
were the only companies whose shares were rising on the Amex Oil Index.