- The Washington Times - Tuesday, April 14, 2009

COLUMBUS, OHIO (AP) - Oil prices wavered Tuesday as traders continued to look for signs that either the economy is stabilizing and will push up demand for crude or that the glut of oil around the globe will continue to hold down prices.

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 a nickel at $50 a barrel on the New York Mercantile Exchange in morning trading. The contract on Monday dropped $2.19 to settle at $50.05.

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.

“We’re still a market gravitating around the $50 level,” said Jim Ritterbusch of Ritterbusch and Associates.

The Energy Information Administration on Tuesday projected 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 of $3.81 a gallon.

During the driving season, consumption of gasoline is projected to increase by 1 percent to 9.1 million barrels a day, mostly because of last summer’s high prices when oil hit $147 a barrel and hurricane-related distribution problems in September held down consumption.

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 auto club AAA, Wright Express and Oil Price Information. Prices are 14.2 cents higher than a month ago, but $1.323 below year ago levels.

The lower prices, however, have not been driving demand in the U.S. higher 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 a further 430,000 barrels a day, or 2.2 percent, this year. Consumption is not expected to increase until next year.

Production, meanwhile, in the U.S. should climb by 440,000 barrels a day to 5.4 million barrels, the first increase in production 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 2.5 cents to $3.65 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.”

Traders also are focused on weekly petroleum inventory data that the EIA will release Wednesday.

Analysts expects EIA to report a build of crude stocks of 2.5 million barrels a day, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Crude stocks already are at 16-year highs.

The analysts expect gasoline stocks to fall 960,000 barrels and stocks used for diesel fuel and heating oil to fall by 1.1 million barrels. Refinery utilization is expected to edge up 0.15 percentage points to 81.95 percent.

Traders discounted statements by Federal Reserve Chairman Ben Bernanke that there are signs the recession may be easing and economic data that showed retail sales fell unexpectedly in March.

A big drop in auto sales led the overall slump in demand. Sales also plunged at clothing stores, appliance outlets and furniture stores.

The Labor Department said the Producer Price Index, which measures price changes at the wholesale level, fell by 1.2 percent in March, compared with analysts’ expectations of no change. The PPI increased 0.1 percent in February.

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, below analysts’ forecasts of a 0.1 percent rise.

In other Nymex trading, gasoline for May delivery gained 0.5 cent at $1.4690 a gallon and heating oil rose 1.56 cents to $1.4136 a gallon.

In London, Brent prices rose 30 cents to $52.44 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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