Energy prices, a key reason for the recent spike in U.S. inflation, continued to retreat Wednesday.
Crude oil futures in New York fell to a six-week low on expectations that an economic slowdown will reduce demand in the United States, the world's largest energy consumer.
Natural gas futures also slid.
The economic slowdown is expected to compound a seasonal lull in refinery demand for crude oil in the second quarter--before the summer driving season increases consumption of gasoline. That will offset any production cuts adopted next month by the Organization of Petroleum Exporting Countries, analysts said.
"OPEC's leaning toward a cut of something less than a million barrels a day, but there's still an overall sentiment in the market that there's a lot of supply out there," said Justin Fohsz, a broker at Starsupply Petroleum in Englewood, N.J. "Demand is not going to be there with the economy going slower."
Crude oil futures for April delivery fell 28 cents, or 1%, to $28.53 a barrel Wednesday on the New York Mercantile Exchange, the lowest closing price since Jan. 9. Prices have dropped nearly 10% since Feb. 8.
The nation's oil inventories recently rose above year-earlier levels after almost two years of deficits, according to the American Petroleum Institute.
But after trading ended Wednesday, the institute reported an unexpected 12-million-barrel, or 4.1%, drop in U.S. inventories last week, pushing them back below the year-earlier level. Traders said that report could support prices in the near term.
Natural gas futures in New York on Wednesday eased 13 cents to $5.15 per million British thermal units, the lowest price since Nov. 7.
Gas futures had rocketed to nearly $10 per million BTUs in late December, but since then fears of shortages have eased substantially.