Oil drops below $88; natural gas falls 6 pct.

AP News
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Posted: Aug 02, 2012 11:56 AM
Oil drops below $88; natural gas falls 6 pct.

NEW YORK (AP) — The price of oil dropped below $88 per barrel Thursday after the head of the European Central Bank disappointed investors by failing to take immediate action to prop up the eurozone economy.

ECB President Mario Draghi said last week that he would do "whatever it takes" to save the euro. To many, that meant Draghi would move quickly to spark borrowing and spending in the European Union.

So far he hasn't delivered. In a speech on Thursday, Draghi suggested the ECB could buy bonds to lower borrowing costs for European countries. But he offered no specific measures. Draghi's counterpart in the U.S., Federal Reserve Chairman Ben Bernanke, also declined to announce any new stimulus measures after a Fed policy meeting on Wednesday.

Benchmark U.S. crude lost $1.24 to $87.67 per barrel in New York. The price has bounced around for the past few weeks on speculation about whether central banks in the U.S. and Europe would take stronger action to influence growth.

"There's just some disappointment out there that they're not going to move dramatically right now," said Phil Flynn, an oil analyst with Price Futures Group. "There is still a belief that Draghi will do something eventually."

Meanwhile, natural gas prices plunged 6.3 percent after the U.S. said supplies grew more than expected last week. The Energy Information Administration reported that natural gas supplies grew by 28 billion cubic feet. The nation's supply is now 14.5 percent higher than the five-year average.

Natural gas prices had been rising this summer as homeowners cranked up air conditioners and increased demand for gas-generated power. But the government report showed that demand still isn't strong enough to cut into the country's surplus of natural gas.

Natural gas dropped 19.4 cents to $2.977 per 1,000 cubic feet.

At the pump, retail gasoline prices added 1.3 cents to a national average of $3.534 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded has jumped by more than 20 cents since the beginning of July. It's still 40 cents cheaper than its peak price for the year in April.

In other futures trading, heating oil was flat at $2.8619 per gallon while wholesale gasoline added 5.29 cents to $2.8871 per gallon.

Brent crude, which helps set the price for imported oil, added 37 cents to $106.33 per barrel in London.

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