Updated from 1:51 p.m. EDT
Oil prices plunged Thursday as signs of a deceleration in global oil consumption and last week's build in distillates stocks spurred profit-taking.
The August crude contract closed down $2.21 to $57.80 a barrel on Nymex. Gasoline futures tumbled about 7 cents, or 3.8%, to $1.68 a gallon.
"This is the post-hurricane response we were waiting for after Dennis, but was delayed by Emily," Said Phil Flynn, senior market analyst at Alaron Trading. He added that since refiners were able to build healthy distillate inventories, "people felt comfortable to get out of the long side, at least for today."
Bears were encouraged by reports that put Hurricane Emily on a course that would spare the main oil and gas regions of the U.S. Gulf Coast, instead taking it over Mexico. Still, early weather forecasts predicting an unusually active hurricane season are proving accurate and continue to keep the market on edge.
A report Wednesday by the International Energy Agency indicated that demand growth in the U.S. and China, the world's two biggest oil consumers, has slowed. It also estimated that OPEC has enough production capacity to meet a surge in fourth quarter demand.
On the bullish side, however, the agency predicted a demand rebound in 2006 led by a 7% increase in Chinese crude consumption.
Analysts have been blaming the Chinese government for its country's decelerated oil demand, as its efforts to keep price caps on oil products, such as gasoline and diesel, have deterred local refiners from purchasing oil.
The U.S. Energy Department said in a weekly report Wednesday that crude inventories fell by 3.9 million barrels last week, as crude supply was somewhat disrupted by the storms. Gasoline stocks fell by 2.7 million barrels and distillate stocks were up 3.2 million barrels.
In an sign that high crude prices could start to curb consumer spending,
said Thursday that it plans to raise its top level fare caps by $100, due to "the volatile and unprecedented increases in jet fuel costs." Paul Matsen, the airline's chief marketing officer, said in a release that Delta was forced to find ways to offset the dramatic spike in energy costs.
In company news, the independent oil and gas producer
said it expects record second-quarter and full-year results. The company estimates production grew in the second quarter by 27% from the same time a year ago, driven by a 97% success rate in drilling 159 wells. Range drills in various tight sand and coal bed methane properties, with operations in the Appalachian, Southwestern and Gulf Coast regions. Shares earlier in the session rose 86 cents, or 2.8%, to $31.36.
Elsewhere in the pipelines space,
Northern Border Partners
, which transfers natural gas via pipelines from Canada to the U.S., said it expects net income to be slightly higher than previously predicted. Analysts on average expect second-quarter earnings of 46 cents per unit, according to Thomson Financial.
The slide in oil prices has pressured the Amex Oil Index down 1.7%, as shares of the major producers tumbled.
fell 0.2%, and
The Philadelphia Oil Service Sector Index fell 2.4% led by steep declines of 3.2% at