Oil falls as demand woes resurface
Government reports that crude supply levels are unchanged, while gasoline supplies rise.
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NEW YORK (CNNMoney.com) -- Oil prices resumed their downward spiral Wednesday as ongoing economic concerns affected fuel demand, and a report showed that U.S. crude stockpiles were unchanged.
For the week ended Oct. 31, crude supplies held steady compared to the week before, according to the Energy Department.
U.S. crude for December delivery ended the day down $5.23 to $65.30 a barrel in New York. The move nearly reversed Tuesday's climb of $6.62 to $70.53.
Oil had been down $1.56 to $68.97 just before the report's release.
"Yesterday's rally was probably a bit overdone," said James Cordier, founder of energy brokerage Optionsellers.com in Florida.
Gas and distillates: The department reported a 1.1 million barrel build in gasoline stocks, and a 1.2 million barrel rise in supplies of distillates, which are used to make diesel fuel and home heating oil.
"We won't be running out of heating oil or gasoline any time soon," said Cordier.
"A lot of the refinery companies are simply not importing a lot because they really don't need it," he added.
Analysts polled by energy information firm Platts had predicted an increase of 500,000 barrels of crude for the week. The firm had also predicted a drop of 1.1 million barrels in gasoline stocks, and a 1.4 million barrel rise in distillate supplies.
Economy and demand: The report came on top of a slew of bearish economic data, which included a report showing that job cuts announced in October jumped 19% to 112,884, the biggest increase since January 2004.
A report on gas station credit card swipes by MasterCard also showed that demand for gasoline at the pump had declined by 3.9% last week compared to the same period a year ago.
Gas demand increased by 1.3% compared to the week before, according to the report, but it was the 28th straight week in which the report showed a decline in fuel demand from the prior year.
Falling demand for fuel due to the ailing economy has helped drive oil prices down from their peak of $147.27 in July. Gasoline prices have followed suit, falling to $2.365 by Wednesday, according to a report from motorist group AAA.
Gas reached its high of $4.114 a gallon on July 17 before trending downward.
Energy and Washington: Worries about higher gasoline prices Wednesday followed the election of Barack Obama to the presidency the night before.
Obama's ascent puts the Democratic Party in control of the White House, as well as both houses of Congress, and it could spell major changes in energy policy that could raise the price of gas.
A democratic Washington is "probably bullish for [gas] prices as certain steps are taken to clean up the environment and reduce emissions," said Cordier.
He pointed to the possibility that the new government might levy taxes on refiners, which would probably be passed along to consumers, as well as a possible direct tax increase on gas at the pump.
Experts agreed that changes in energy policy will likely take a back seat to repairing the economy in the short term. But if the economy improves over the next four years, said Mark Waggoner, president of Excel Futures in California, demand for oil could return, along with higher crude prices as Americans resume their consumption of gasoline.
"A lot of people still have their SUVs, they just parked them for a while," Waggoner said.
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