Oil dropped more than 2 percent Thursday after Federal Reserve Chairman Ben Bernanke said the government would not immediately pump more cash into economic stimulus programs.
Bernanke told lawmakers on Wednesday that the Fed was looking at a variety of stimulus measures, including another round of bond buying, to lower long-term interest rates. Stimulus measures like that tend to weaken the dollar, and that drives investors to commodities like oil. On Thursday he dampened hopes that that would happen soon.
"We're not prepared at this point to take further action" to stimulate the economy," Bernanke said.
Oil tumbled shortly after Bernanke spoke.
Benchmark West Texas Intermediate crude for August delivery fell $2.36 to settle at $95.69 per barrel on the New York Mercantile Exchange. In London, Brent crude gave up $1.59 to settle at $116.26 per barrel on the ICE Futures exchange.
Oil climbed nearly 20 percent late last yeaer, ahead of the Fed's $600 billion bond-buying program that began in November.
"They're not readying the stimulus package right now," and that's pushing some investors away, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
The dollar rose on Bernanke's comments. Oil tends to fall as the dollar rises, since oil is priced in dollars and becomes more expensive for investors with foreign currency as the dollar strengthens.
Meanwhile new economic reports on Thursday showed to only faint signs of a turnaround. The government said retail sales rose by 0.1 percent in June. They declined the previous month. And the Labor Department said the number of people who applied for unemployment benefits dropped last week by 22,000 to a seasonally adjusted 405,000. That's the lowest level in three months, but application levels above 400,000 still reflect a weak job market.
Gasoline pump prices are still rising. The national average added a penny overnight at $3.655 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 33 cents cheaper than its peak price this year, but it is 94.2 cents higher than the same time last year and 7 cents higher than it was just a week ago.
The Energy Information Administration also said that natural gas supplies rose more than expected last week. However, the 2.6 trillion cubic feet in storage last week is 2 percent below the five-year average.
In other Nymex trading for August contracts, heating oil fell 1.48 cents to settle at $3.0849 per gallon and gasoline futures gave up 2.68 cents to settle at $3.1248 per gallon. Natural gas lost 2.9 cents to settle at $4.358 per 1,000 cubic feet.
Chris Kahn can be reached at http://www.twitter.com/ChrisKahnAP.