U.S. benchmark West Texas Intermediate crude oil fell US$2.24, or 2.4 per cent, to US$92.98 per barrel in afternoon trading in New York, the second drop of 2 per cent in two days. Brent crude, which is used to price oil used to make gasoline in many U.S. refineries, fell US$1.71 to US$113.89.
Crude oil's recent dip is a result of ample supplies and recent speculation that the Federal Reserve may soon allow interest rates to rise, which would reduce the supply of easy cash investors have been using to buy commodities like oil.
The drop in crude hasn't translated into lower pump prices — yet. The average U.S. retail gasoline price rose a penny to US$3.78 per gallon Thursday, according to AAA, the Oil Price Information Service, and Wright Express. Gasoline has risen for 34 days straight since averaging US$3.29 on Jan. 18.
The two day plunge in crude and slightly lower wholesale gasoline futures prices are expected to at least slow the rise in pump prices, and perhaps push them back slightly.
"We'll get a pause here in the next couple of days, but (prices) will still be higher on St. Patrick's Day than they are now," said Tom Kloza, chief oil analyst at OPIS.
Over the coming weeks gasoline prices are expected to drift higher, as they do nearly every late winter and early spring when refiners close for maintenance and switch to more expensive summer blends. That reduces supplies of gasoline and sends prices up. Refineries are running at their lowest levels in 2 years because more plants are undergoing more extensive maintenance this year.
Kloza expects the national average price to peak in March or April at somewhere between US$3.80 and US$4.10 per gallon. Last year gasoline topped out at US$3.94 on April 6.
This year the oil and gasoline markets began their spring surges early. Oil prices rose sharply in late January and gasoline prices soon followed. For the past three weeks oil wavered between US$95 and US$98 per barrel before falling Wednesday and Thursday.
Oil prices were pushed lower by a transcript of the latest Fed meeting that showed some policymakers expressing doubts about the central bank's bond-buying program. If the Fed curtails or ends the program earlier than anticipated, that could affect economic growth and reduce demand for oil.
The Energy Department reported Thursday that crude supplies in the U.S. grew by 4.1 million barrels last week. That's double what analysts expected. Ample supplies typically translate into lower prices.
Gasoline supplies fell by 2.9 million barrels, slightly less than analysts expected.
In other energy futures trading on the Nymex:
— Natural gas fell 3 cents to US$3.25 per thousand cubic feet.
— Heating oil fell 5 cents US$3.10 per gallon (3.79 litres).
— Wholesale gasoline was down 3 cents to US$3.23 per gallon (3.79 litres).
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