VIENNA, Austria, AP -Oil prices fell Thursday after U.S. government data showed motor fuel demand weakening, apparently in response to higher pump prices.
The selloff occurred despite the data also showing that domestic inventories of gasoline shrank for the eighth consecutive week. Still, analysts said shortages did not seem imminent, noting increased refinery production and a growth in U.S. gas imports.
Light, sweet crude for June delivery fell 60 cents to $71.33 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. Brent crude for June delivery on London’s ICE Futures slumped to $71.28 a barrel, down 81 cents.
Gasoline futures dropped nearly 3 cents to $2.1051 a gallon while heating oil was down more than a cent to $2.0100 a gallon. Natural gas was trading at $7.177 per 1000 cubic feet, down 9.4 cents.
The U.S. Energy Department said on Wednesday gasoline demand was up only 0.3 percent over the past four weeks compared with the same period in 2005. But at this time last year, demand for the four-week period had risen 1.5 percent compared with the same period in 2004.
The average retail price of gasoline in the U.S. is now $2.91 a gallon, or 68 cents higher than a year ago. Still, Vienna’s PVM Oil Associates noted that “if this close-to-stagnation in gasoline consumption becomes a new trend — potentially related to retail prices of close to $3 a gallon — summer shortages would become more unlikely.”
Despite the recent declines, oil prices remain about a third higher than a year ago because of supply disruptions, geopolitical tensions and the scant surplus production capacity available to the industry in the event of a major output hiccup. Analysts also said they expect global energy demand to remain strong.
Nigeria is producing some 450,000 fewer barrels per day because of violence in the region. On the geopolitical side, the West’s effort to contain Iran’s nuclear ambitions is the top concern.
China said Thursday the Iran nuclear crisis is at a crucial stage and restraint was needed to resolve the issue as Iran faces a Friday deadline by the U.N. to stop enriching uranium.
“We hope the relevant parties can keep calm and exercise restraint so as to avoid moves that would further escalate the situation,” Qin Gang, a Chinese Foreign Ministry spokesman said.
The situation was “indeed at a crucial stage,” he said.
The U.S. Energy Department report showed that domestic crude oil inventories fell by 200,000 barrels last week to 345 million barrels, or 5.6 percent above year-ago levels. Gasoline inventories shrank by 1.9 million barrels to 200.6 million barrels, or 5.6 percent below year-ago levels. Supplies of distillate fuel, which include heating oil and diesel, increased by 1 million barrels to 115.6 million barrels, or 10.6 percent higher than last year, the agency said.
Refineries ran at 88.2 percent of their capacity, up 2 percent from a week ago, while crude-oil imports rose by 199,000 barrels a day to 9.86 million barrels a day.