Oil falls below $107 amid weak US gasoline demand

AP News
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Posted: Mar 01, 2012 3:30 AM
Oil falls below $107 amid weak US gasoline demand

Oil prices fell to below $107 a barrel Thursday in Asia after U.S. crude supplies grew more than expected amid weak gasoline demand.

Benchmark oil for April delivery was down 39 cents to $106.68 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 52 cents to $107.07 per barrel in New York on Wednesday.

Brent crude rose 2 cents to $122.68 per barrel in London.

The Energy Department said Wednesday that inventories of crude oil rose by 4.2 million barrels last week. Analysts were expecting an increase of just 1 million barrels. Demand for gasoline over the four weeks ended Feb. 24 was 6.7 percent lower than a year earlier, the department said.

Some analysts expect higher fuel costs will eventually undermine demand and push crude prices lower. U.S. retail gasoline prices rose to an average of $3.73 per gallon, 30 cents higher than a month ago.

Other economic indicators were more encouraging. The U.S. economy grew 3 percent in the fourth quarter, slightly more than the initial estimate of 2.8 percent. In another report, the Institute for Supply Management-Chicago said manufacturing in the Midwest region rose to a 10-month high in February.

The latest figures reinforce largely positive economic data from the U.S. during the last few months. Better than expected U.S. economic growth and moves by central banks to boost global money supply have helped push crude up to near $110 earlier this week from $75 in October.

Concern that tension over Iran's nuclear program could lead to an armed conflict and crude supply disruptions has also helped keep prices near nine-month highs. The U.S. and Europe are imposing sanctions on Iran while the Middle Eastern country has threatened to cut supplies to some countries and tensionshalt oil tankers passing through the Persian Gulf's Strait of Hormuz.

"Rising in the Middle East could easily add another $20 to $40 to oil prices," Bank of America Merrill Lynch said in a report. "A geopolitically prompted supply side shock is ultimately what most investors are concerned about."

In other energy trading, heating oil rose 0.2 cent to $3.21 per gallon and gasoline futures were steady at $3.26 per gallon. Natural gas fell 2.6 cents at $2.59 per 1,000 cubic feet.