Oil dropped below $99 a barrel Thursday, but it's still too high as far as the International Energy Agency is concerned.
The IEA, based in Paris, said that even after falling about 13 percent since the beginning of May, petroleum products continue to take a large share of household and business spending around the world and threaten to stall the global economic recovery. The agency warned that there's "urgent need" for refineries to produce more gasoline and bring down pump prices.
Benchmark West Texas Intermediate crude for June delivery fell $1.66 to settle at $98.44 per barrel on the New York Mercantile Exchange. The June contract ends Friday, and most trading has switched to the July contract, which lost $1.63 to settle at $98.93 per barrel.
Lackluster economic news on Thursday helped pushed down crude along with the IEA report. The Philadelphia Federal Reserve reported that its measure of manufacturing activity slumped to the lowest reading since October. And the National Association of Realtors said the housing market remains weak as fewer people purchased previously occupied homes in April.
On the positive side, the Labor Department reported that the number of people applying for unemployment benefits fell sharply for the second straight week.
"A little bit of concern" is creeping into oil markets, PFGBest analyst Phil Flynn said. "We're back to: `Wait, maybe the economy isn't that great. Maybe we shouldn't be so hyped-up about demand'" possibly increasing later this year.
Meanwhile, retail gasoline prices continue to fall, losing another 2 cents on Thursday to a national average of $3.905 per gallon. A gallon of regular is 7 cents higher than a month ago and $1.053 more than the same time last year.
Experts say gasoline should get cheaper toward the Memorial Day weekend and drop to an average of $3.50 per gallon by June.
The nation's natural gas supplies grew more than expected last week. The Energy Information Administration said in its weekly report that U.S. supplies grew by 92 billion cubic feet for the week ended May 13. That's about 11 percent lower than last year's storage level.
Natural gas for June delivery lost 10.5 cents to settle at $4.161 per 1,000 cubic feet on the Nymex.
In other trading for June contracts, heating oil fell 1.12 cents to settle at $2.8974 per gallon and gasoline futures gave up 2.95 cents to settle at $2.9260 per gallon.
In London, Brent crude lost 88 cents to settle at $111.42 per barrel on the ICE Futures exchange.
Chris Kahn can be reached at http://www.twitter.com/ChrisKahnAP