Oil prices lower on concerns about global demand

AP News
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Posted: Jan 18, 2012 3:20 PM
Oil prices lower on concerns about global demand

Oil prices finished slightly lower on Wednesday, as concerns about Europe's debt crisis and weaker global demand offset fresh signs of an improving U.S. economy.

Benchmark crude fell 12 cents to end at $100.59 per barrel in New York. It rose as high as $102.06 per barrel earlier in the day. Brent crude fell 87 cents to finish at $110.66 per barrel in London.

Two developments pointed to signs of slower growth in oil demand this year. The International Energy Agency issued a revised forecast predicting global demand for oil would increase by 1.1 million barrels a day, down from an earlier estimate of 1.3 million barrels a day.

In another sign of weaker demand for oil and gas, Hovensa LLC said Wednesday that it will close a major refinery in the U.S. Virgin Islands next month that is producing about 350,000 barrels per day. The company, a joint venture of Hess Corp. and Venezuela's state-owned oil company, has incurred losses of $1.3 billion over the past three years and expected losses to continue in the slower global economy.

"Here's another instance where refiners are facing such poor margins they're closing units down and that suggests that demand in the coming months for crude oil to be refined is going to be dropping off," said Tradition Energy analyst Gene McGillian.

Also on Wednesday there was encouraging news about the U.S. economy to offset the gloomier international picture. The Federal Reserve reported that U.S. manufacturing activity increased in December by the biggest amount in a year. And another report from a private group said that new orders rose and production increased last month.

Oil prices have hovered between $98 per barrel and $103 per barrel this month as investors look for more signs of where the global economy may be headed. Europe's sovereign debt crisis has been in the spotlight because a slowdown there could mean a significant drop in demand for oil in the months ahead. The International Monetary Fund said Wednesday that it wants to increase its financial resources by about $500 billion to help ease the crisis.

In other energy trading, heating oil fell 2 cents to end at $3.01 per gallon, gasoline futures rose 5 cents to finish at $2.83 per gallon and natural gas fell 2 cents to end at $2.47 per 1,000 cubic feet.

At the pump, the national average for retail gas is $3.38 per gallon, according to AAA, Wright Express and the Oil Price Information Service. That's about 16 cents more than a month ago and nearly 28 cents more than a year ago.