- The Washington Times - Tuesday, April 14, 2009

COLUMBUS, OHIO (AP) - Oil prices slid below $50 a barrel Tuesday, as stock markets lost ground on signs the economic recovery may not be as close as some thought.

The government, meanwhile, said drivers hitting the road this summer will pay far less for gasoline than they did last summer when prices hit a record $4.11 a gallon.

Benchmark crude for May delivery lost 76 cents at $49.29 a barrel on the New York Mercantile Exchange in afternoon trading.

Oil prices have traded near $50 a barrel for the last two weeks after jumping from below $35 in February as investors struggle to gauge the health of a global economy reeling from the longest recession in the U.S. since World War II.

“Everything we’ve seen today confirms the bearish view,” said Addison Armstrong of Tradition Energy.

The Energy Information Administration on Tuesday predicted that regular-grade gasoline will average $2.23 a gallon through September. The monthly average figures to peak at $2.30 a gallon, a bargain compared with last summer, when gasoline cost an average $3.81 a gallon.

During the driving season _ from April 1 to Sept. 30 _ gasoline consumption is forecast to increase by 1 percent to 9.1 million barrels a day. Last summer oil hit $147 a barrel and hurricane-related distribution problems in September kept drivers away from the pump.

Prices at the pump are already well below year-ago levels, falling 0.1 cents overnight to a national average of $2.05 a gallon, according to AAA, Wright Express and Oil Price Information. Prices are 14.2 cents higher than a month ago, but $1.323 below year-ago levels.

But lower prices have not been driving demand in the U.S. because of the weak economy.

EIA said total U.S. consumption of liquid fuels in 2008 declined by almost 1.3 million barrels a day, or 6.1 percent, from 2007 and is expected to fall by another 430,000 barrels a day, or 2.2 percent, this year.

Phil Flynn of Alaron Trading Corp. said it was impressive that oil prices were holding up given the weak EIA report and a stock market that was down about 1 percent.

“It’s probably not as a bad as what the market prepared for,” he said of the report.

The government also said production in the U.S. should climb by 440,000 barrels a day to 5.4 million barrels in 2009, the first increase since 1991.

Consumption of natural gas is expected to decline by 1.8 percent this year, with a 7.4 percent drop in the industrial sector due to the weak economy, according to EIA.

After hitting $13.69 per 1,000 cubic feet last summer, natural gas prices have plummeted to below $4. Prices rose 7.2 cents to $3.700 per 1,000 cubic feet Tuesday.

“Commercial and industrial demand is limping along, space heating demand is winding down,” said trader and analyst Stephen Schork in his daily report. “As such, the NYMEX continues to grind lower.”

Lower natural gas prices could be good news for consumers. Some people are already locking in lower prices ahead of the next heating season.

Traders also are focused on weekly petroleum inventory data that the EIA will release Wednesday. Analysts expect a build of 2.5 million barrels in crude stocks, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Crude stocks already are at 16-year highs.

Analysts also see gasoline stocks falling by 960,000 barrels and stocks of diesel fuel and heating oil shrinking by 1.1 million barrels. Refinery utilization is expected to edge up 0.15 percentage point to 81.95 percent.

Although Federal Reserve Chairman Ben Bernanke said Tuesday there are “tentative signs” that the recession may be easing, March retail sales numbers showed a surprise decline. Businesses slashed inventories for a sixth straight month in February, the longest stretch since the last recession.

The Labor Department said the Producer Price Index, which measures price changes at the wholesale level, fell by 1.2 percent in March. The drop was largely driven by declining food and energy prices. Gasoline prices plummeted 13.1 percent, while home heating oil fell 13.2 percent, the sharpest drops for both since December. Food prices fell 0.7 percent.

Excluding volatile food and energy prices, the PPI was unchanged.

In other Nymex trading, gasoline for May delivery lost 1.27 cents at $1.4505 a gallon and heating oil fell 0.2 cent to $1.400 a gallon.

In London, Brent prices fell 17 cents to $51.97 a barrel on the ICE Futures exchange.


Associated Press writers H. Josef Herbert in Washington, Christopher S. Rugaber in Washington, Jeannine Aversa in Washington, George Jahn in Vienna and Alex Kennedy in Singapore contributed to this report.

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