Oil tumbles below $34

Rising inventories and faltering demand drive crude down to its lowest level in nearly two months.

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By Ben Rooney, CNNMoney.com staff writer

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Click the chart for current energy prices.

NEW YORK (CNNMoney.com) -- Oil prices fell to a seven-week low Thursday as investors remain concerned about weak energy demand and swelling U.S. crude supplies.

Light, sweet crude for March delivery fell $1.96, or 5%, to settle at $33.98 a barrel. It was the lowest closing price since Dec. 19, when oil ended at $33.87 a barrel.

Crude prices fell more than 4% Wednesday after the International Energy Agency said it expects demand for crude to fall 84.7 million barrels per day in 2009. That's a decrease of 570,000 barrels per day, compared to January estimates.

Demand for oil and gasoline has evaporated as a deep recession cripples the global economy. Oil prices have tumbled nearly 19% so far this year, and have shed more than $110 since peaking at $147 a barrel last year.

As consumption tapers off, the amount of oil in storage has ballooned.

A weekly report from the Energy Department showed Wednesday that U.S. oil inventories grew a larger-than-expected 4.7 million barrels in the week ended Feb. 6. Crude stocks are now at their highest levels in more than 15 years, according to analysts at research firm Cameron Hanover.

"Those high inventories will keep oil prices on a downward path," said Tom Pawlicki, an energy analyst at MF Global Research in Chicago, in a research note. Over the next week, prices could fall to the "low $30's," he added.

At the same time, a raft of mixed economic data released Thursday highlighted the challenges facing the economy -- adding to the bleak outlook for demand.

A report from the National Association of Realtors showed that home prices fell 12.4% in the fourth quarter of 2008.

The Commerce Department said business inventories fell 1.3% in December, as sales remained weak.

Separately, the Labor Department said the number of Americans filing for first-time unemployment benefits claims fell by 8,000 to 623,000 in the week ended Feb. 7. Jobless claims remained, however, near a 26-year high.

Another government report showed retail sales unexpectedly rose in January. Total retail sales jumped 1% last month after six consecutive months of declines. Economists had forecast a decline of 0.8%.

The flurry of data comes as Congress works to finalize a $789 billion economic stimulus package. President Obama could sign the bill into law as soon as next week.

In addition to stimulus, the market is awaiting further information on the Obama administration's plan to deploy the second half of the $700 billion allocated under the Troubled Asset Relief Program.

Treasury Secretary Tim Geithner outlined the administration's priorities for the TARP funds Tuesday, but investors were disappointed by the lack of details.

Wall Street was not convinced by the government's efforts to jolt the economy out of the recession it has been stuck in for more than a year. Stocks were down nearly 2% with two hours left in the session Thursday as shares of financial institutions plummeted.

Gasoline prices, which have been climbing steadily in recent weeks, rose another 1.2 cents overnight.

The national average price for a gallon of regular gasoline now stands at $1.952, according to motorist group AAA, up nearly 21% so far this year. Still, gas prices are down more than $2 from last year's record high price of $4.114. To top of page

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