Updated from 1:56 p.m. EST
Oil prices eased and gasoline plunged Wednesday as an unexpected decline in U.S. fuel inventories couldn't keep the bulls running.
Crude for May delivery slid 57 cents to end the trading day at $61.77 a barrel on the Nymex, while gasoline prices tumbled 10 cents to $1.73 per gallon. In the U.S. Energy Department's weekly update on petroleum supplies, crude stocks dropped 1.3 million barrels, or less than 1%, to 338.6 million barrels.
Analysts polled by
had called for a 2.4 million-barrel increase in crude for the week ended March 17. A 6% drop in imports and higher processing rates helped draw down inventories last week. Still, the drop leaves inventories nearly 9% above last year's level.
Gasoline inventories fell 2.3 million barrels to 221.6 million barrels, eclipsing the 1 million-barrel drop analysts had been expecting. Higher demand for gasoline helped draw down supplies, but they still remain 1% above last year.
Relatively low spot prices and ongoing refinery maintenance have boosted crude stockpiles to seven-year highs over the past three weeks. Many refineries are operating at slower rates to switch over to cleaner summer blends of gasoline. Crude is processed into petroleum products, like gasoline and heating oil. When refiners operate at lower levels, oil builds up, boosting inventories.
Refiners are also buying crude on the spot market, rather than pulling it from their own supplies. On Wednesday, June crude closed at $63 a barrel and crude for July delivery settled at $63.78.
Distillates, which include diesel and heating oil, dropped 800,000 barrels to 126.7 million barrels. The decline was much less than the 2.1 million barrel decline analysts had predicted. An unseasonably warm winter has helped boost supplies 15% above a year ago because companies and consumers are not cranking up their furnaces as often.
Heating oil closed down 3 cents at $1.74 a gallon.
This week, light trading of the April contract, which expired Wednesday, and expectations of high crude supplies overshadowed ongoing supply problems around the world. On Tuesday, the U.N. Security Council failed to come to an agreement over what action to take against Iran for its refusal to back from nuclear development. Tehran restarted uranium enrichment this year after a two year hiatus in a bid to generate more power. The West, though, suspects the move is a ruse to develop nuclear weapons.
Ongoing rebel attacks in Nigeria have also kept traders on edge and shaved that country's daily oil production by 25% to 1.6 million barrels. Militants have targeted the central government to gain a share of the country's petrodollars.
Cold weather forecasts boosted natural gas prices by 8 cents to $6.95 per million British thermal units. The National Weather Service, in its six-to-10-day outlook, said temperatures will be below average in the eastern U.S. next week. Natural gas is used to generate electricity and heat.
Thanks to an unseasonably warm winter, there is 31% more natural gas in storage than last year, more than enough to ride out next week's cold snap. A 24 billion cubic feet drawdown is expected, according to a
poll, in the Energy Department's supply report due out at 10:30 a.m. Thursday. The five-year average decline for the week is 59 billion cubic feet.
Energy stocks on the whole advanced in trading Wednesday. Shares of
increased 34 cents to $61.06,
added 30 cents to $68.55;
was up 85 cents at $127.86 and
Royal Dutch Shell
added 12 cents to $60.87.