Benchmark U.S. crude on Wednesday fell by US$1.17 to finish at a seven-month low of $92.81 per barrel in New York. Oil is down nearly 13 per cent since the beginning of May.
Brent crude, which helps set the price of oil imported into the U.S., fell by 53 cents to finish at $111.71 per barrel in London.
Prices fell as a report showed that U.S. crude supplies had climbed to the highest level in 22 years. Supplies grew last week by 2.1 million barrels, according to the Energy Information Administration. That's a bigger increase than analysts expected, and more could be on the way.
Japan's Kyodo news agency reported that the U.S. will ask other countries to release spare oil reserves when the G8 meets this Friday. The report follows rumours earlier this year that Western countries were planning a co-ordinated release of spare supplies.
The White House wouldn't comment about the report.
Peter Donovan, a broker at Vantage Trading, said oil fell sharply in the afternoon as the Kyodo headline was passed around the New York Mercantile Exchange, where futures are traded.
Kyodo said President Obama will ask leaders of other G8 countries — Britain, Canada, France, Germany, Italy, Japan, Russia — to make spare supplies available to refineries this summer. The release would be geared toward keep prices in check in July, when the European Union begins a ban on oil imports from Iran.
The U.S. and other industrialized countries tried a similar tactic last summer after the Libyan rebellion shut down that country's oil fields. The move had only limited success, however. Oil prices fell temporarily but ended 2011 higher than they started.
Oil prices have been falling on signs that demand is cooling while supplies are building. Major oil producers like Saudi Arabia delivered more supplies to the world market. Meanwhile, data from the U.S. and China suggest economic growth is moderating, while Europe is teetering on recession.
If the eurozone cannot solve its debt problems, it will weaken an economy that consumes 18 per cent of the world's oil. It also could contribute to a global banking crisis that would hurt the U.S., China and other countries.
"It's making a lot of guys nervous around here," Donovan said.
At the pump, U.S. retail gasoline prices were flat at a national average of $3.73 per gallon, according to AAA, Wright Express and Oil Price Information Service. The price of a gallon of regular has held steady since Friday, though experts say the average pump price could fall as low as $3.50 per gallon by the Fourth of July.
In Canada, the price at the pump averaged C$1.275, down from $1.341 a month ago, according to GasBuddy.com.
In other energy futures trading, heating oil lost 3.54 cents to finish at US$2.8976 per gallon, while wholesale gasoline fell dropped by 2.32 cents to end at $2.9209 per gallon. Natural gas rose by 11.8 cents to end at $2.618 per 1,000 cubic feet.
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