- The Washington Times - Wednesday, April 1, 2009

HOUSTON (AP) - Oil prices tumbled below $48 a barrel Wednesday, as more signs of a sick economy fueled worries about energy consumption. The nation’s oil inventories are now at levels not seen in more than 15 years.

But crude’s decline is likely to have a benefit for consumers at the gasoline pump, where the national price for regular unleaded dipped slightly overnight. It marked the first decrease in gasoline prices in more than two weeks.

Benchmark crude for May delivery fell $1.92 to $47.74 a barrel on the New York Mercantile Exchange. That drop wiped out overnight gains, when the contract rose $1.25 to settle at $49.66.

In London, Brent prices fell $1.52 to $47.71 a barrel on the ICE Futures exchange.

Oil prices rebounded sharply last month _ from $40 to above $53 _ taking their cue from a rally in stock markets. But new signs of a prolonged recession _ which has crushed energy demand around the world _ is again pushing prices lower.

In a measure of U.S. manufacturing activity, the Institute for Supply Management said Wednesday the sector contracted for the 14th straight month in March, but at a slower pace than anticipated.

And, as expected, the Energy Department reported Wednesday that crude inventories continued to rise last week, and gasoline stockpiles jumped despite predictions for a steep drop.

Crude inventories rose by 2.8 million barrels, or 0.8 percent, to 359.4 million barrels for the week ended March 27, the Energy Department’s Energy Information Administration said in its weekly report. Oil stockpiles have not been this high since July 1993, according to EIA data. They’re also 15.5 percent above year-ago levels.

Crude is piling up as airlines, manufacturers, automakers and just about every other sector slows down and millions of workers lose their jobs.

For motorists, growing inventories are likely to contribute to some relief when they fill their tanks.

“You do have a strong correlation between crude prices and gasoline prices,” said Jim Ritterbusch, president of energy consulting group Ritterbusch and Associates. “So if we see a large build in crude supplies, it’s going to put more pressure on crude prices, which in turn will mean more pressure on gasoline prices.”

After ticking up steadily for the past week, U.S. retail gas prices fell one-tenth of a cent overnight, with the national average for a gallon of regular unleaded pegged at $2.047 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.

A gallon of regular gasoline is 11.5 cents more expensive than it was a month ago, and prices are expected to continue to increase as refiners switch to more expensive summer blends and the traditional summer driving season approaches.

But analysts say pump prices should remain well below levels seen last summer, when gasoline topped $4 a gallon amid record crude prices. A year ago, the average national price for a gallon of unleaded was almost $3.30 a gallon.

Ben Brockwell, director of data, pricing and information services for the Oil Price Information Service, said gasoline could be hard pressed to climb above $2.15 to $2.20 a gallon if economic indicators remain dour.

AAA says the national average is likely to remain below $2.50 a gallon even at summer’s peak unless an unforeseen event like a hurricane disrupts supplies.

“I think it’s going to be a surprisingly good summer for consumers,” Brockwell said. “We may see $60 crude and $2.25 gasoline, but I think it’s going to take some event _ maybe some geopolitical event _ to get it there.”

Data from Japan and China also suggest their economies _ the two largest in Asia _ have yet to see any benefit from the massive fiscal stimulus packages announced by their governments.

The contraction in China’s manufacturing _ which accounts for about 40 percent of the world’s third-biggest economy _ worsened last month, according to a key survey. In Japan, the world’s No. 2 economy, confidence at the country’s major manufacturers dived to an all-time low.

Some analysts say production cuts by the Organization of Petroleum Exporting Countries have helped to stabilize the oil price, though there are still doubts about the level of compliance with the promised cuts of 4.2 million barrels a day.

Such compliance is important because OPEC accounts for about 40 percent of global supply.

In other Nymex trading, gasoline for May delivery fell 6.69 cents to $1.3544 a gallon, and heating oil fell 5.51 cents to $1.3128 a gallon.

Natural gas for May delivery fell 5.3 cents to $3.723 per 1,000 cubic feet. Earlier, natural gas hit a new low of $3.629 per 1,000 cubic feet.


Associated Press writers Pablo Gorondi in Budapest, Hungary, and Stephen Wright in Bangkok contributed to this report.

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