- The Washington Times - Wednesday, April 15, 2009

NEW YORK (AP) - Oil prices dropped Wednesday as investors digested a fresh stack of gloomy financial reports that showed a dip in industrial production while crude stockpiles swelled with the biggest surplus in 19 years.

Benchmark crude for May delivery fell 32 cents to $49.09 a barrel on the New York Mercantile Exchange. In London, Brent prices lost 44 cents at $51.52 a barrel on the ICE Futures exchange.

The Energy Information Administration said crude oil inventories rose by 5.6 million barrels last week as demand for gasoline and other fuels continued to slide. That was more than twice what analysts expected, and the total of 366.7 million barrels now in storage is the most held since Sept. 7, 1990, according to the EIA.

Meanwhile, the Federal Reserve said that more U.S. factories and mines are becoming idle. Total industrial capacity utilization rate fell to 69.3 percent from 70.3 percent, the lowest on records dating to 1967.

In March, industrial production declined for the fifth straight month, the Federal Reserve said. Production at U.S. factories, mines and utilities dropped a seasonally adjusted 1.5 percent last month.

In line with the depressed economy, U.S. consumer prices also dipped in March, leaving inflation over the past year falling at the fastest clip in more than a half-century.

“Demand will have to come back before you see the oil price move up from $50 in a sustained way,” said Ben Westmore, energy analyst with National Australia Bank in Melbourne. “We haven’t seen any signal that oil demand is turning, and things like falling retail sales in the U.S. contribute to that view.”

Vienna’s JBC Energy noted a massive 13.4-million-barrel build in U.S. crude stocks in the past two weeks, attributing “lower refinery runs resulting from weak product demand.” In its daily research note, it also referred to forecasts by the U.S. Energy Information Administration that 2009 world oil demand would fall by another daily 180,000 barrels to just above 84 million barrels a day.

At the pump, gas prices were flat overnight, rising to a national average of $2.051 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gas prices are 14.1 cents a gallon higher than last month, but $1.335 a gallon cheaper than last year.

In other Nymex trading, gasoline for May delivery dropped 1.45 cents to $1.4431 a gallon. Heating oil for May delivery lost 1.73 cents to $1.3850 per gallon. Natural gas for May delivery slipped 5.9 cents to fetch $3.63 per 1,000 cubic feet.


Associated Press writers George Jahn in Vienna, Ernest Scheyder in New York and Alex Kennedy in Singapore contributed to this report.

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