OIL prices plunged for a second day yesterday, raising hopes that a relentless rise in US gasoline prices may slow or reverse at least temporarily.
Benchmark crude oil fell US$2.38, or 2.5 percent, to finish at US$92.84 per barrel in New York, the second drop of 2 percent in two days. Brent crude, which is used to price oil used to make gasoline in many US refineries, fell US$2.07 to end at US$113.53 in London.
Crude oil's recent slide is a result of ample supplies and recent speculation that the Federal Reserve may soon allow interest rates to rise, which would reduce the supply of easy cash investors have been using to buy commodities like oil.
The drop in crude hasn't translated into lower pump prices - yet. The average US retail gasoline price rose a penny to US$3.78 per gallon (US$1 a liter) yesterday, according to AAA, the Oil Price Information Service, and Wright Express. Gasoline has risen for 34 days straight since averaging US$3.29 on Jan. 18.
The two-day plunge in crude and slightly lower wholesale gasoline futures prices are expected to at least slow the rise in pump prices, and perhaps push them back slightly.
Over the coming weeks US gasoline prices are expected to drift higher, as they do nearly every late winter and early spring when refiners close for maintenance and switch to more expensive summer blends. That reduces supplies of gasoline and sends prices up. Refineries are running at their lowest levels in 2 years because more plants are undergoing more extensive maintenance this year.
This year the oil and gasoline markets began their spring surges early. Oil prices rose sharply in late January and gasoline prices soon followed. For the past three weeks oil wavered between US$95 and US$98 per barrel before falling Wednesday and yesterday.
Oil prices were pushed lower by a transcript of the latest Fed meeting that showed some policymakers expressing doubts about the central bank's bond-buying program. If the Fed curtails or ends the program earlier than anticipated, that could affect economic growth and reduce demand for oil.
The Energy Department reported yesterday that crude supplies in the US grew by 4.1 million barrels last week. That's double what analysts expected. Ample supplies typically translate into lower prices.
Gasoline supplies fell by 2.9 million barrels, slightly less than analysts expected.
In other energy futures trading on the Nymex:
- Natural gas fell 3 cents to finish at US$3.25 per thousand cubic feet.
- Heating oil fell 6 cents to end at US$3.10 per gallon.
- Wholesale gasoline for April dropped by 2 cents to finish at US$3.24 per gallon.
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