Oil plummets on big jumps in crude, gas stocks
NEW YORK -- Oil prices closed at a new 14-month low beneath $70 a barrel Thursday, bringing its price to less than half its July record high after the government reported massive increases in U.S. crude and gasoline supplies.
Investors took the news as more evidence that a global credit crisis and a shaky economy are curbing demand for oil.
At the pump, a gallon of regular gasoline shed another 4 cents overnight to a new national average of $3.084, according to auto club AAA, the Oil Price Information Service and Wright Express. At this rate, the national average for gasoline could fall below $3 by the weekend -- a level not seen since Feb. 16.
The selloff in crude came despite an announcement by OPEC on Thursday that it was moving up by almost a month an emergency meeting to discuss oil's rapid drop in value, including whether or not a production cut is needed. The Organization of the Petroleum Exporting Countries will now meet Oct. 24 at its headquarters in Vienna, Austria, instead of Nov. 18.
Oil market traders ignored the statement, convinced that prices are headed lower.
Light, sweet crude for November delivery dropped $4.69, or 6.2 percent, to settle at $69.85 a barrel on the New York Mercantile Exchange, the lowest settlement prices since Aug. 23, 2007. Earlier prices dipped to $68.57, a level not seen since June 27, 2007.
Crude has now fallen 52.5 percent since surging to a record $147.27 on July 11. Some energy analysts have predicted oil could fall as low as $50.
Thursday's declines accelerated after the U.S. Energy Information Administration said in its weekly report that crude stocks rose by 5.6 million barrels last week, well above the 3.1 million barrel increase expected by analysts surveyed by energy research firm Platts.
The EIA also says gasoline stock rose by 7 million barrels last week, more than double the build analysts had expected.
Demand for gasoline over the four weeks ended Oct. 10 was 5.2 percent lower than a year earlier, averaging nearly 8.8 million barrels a day, the EIA said.
"This report is playing right into the market's deepest fears, that the economy is slowing down and that demand is going to be nonexistent," said Phil Flynn, energy analyst at Alaron Trading Corp. in Chicago.
While U.S. energy supplies have been swelling because of falling demand, they've also grown as U.S. Gulf Coast energy installations continue to increase production after shutdowns caused by Hurricanes Ike and Gustav. That has helped to further drive down prices, especially for gasoline.
