Oil sinks toward $50
Crude prices briefly dip below psychologically significant $50 per barrel mark, finishing at 20-month low on oil inventory surge.
NEW YORK (CNNMoney.com) -- Oil prices slipped Thursday, having dipped below the $50 mark, following a government report that revealed a bigger than expected increase in U.S. crude inventories.
U.S. light crude for February delivery fell as low at $49.90 a barrel, its lowest trading level since May 25, 2005, but pared some of its late-session losses to finish $1.76 lower at $50.468 a barrel.
In its weekly inventory report, the Energy Information Administration said crude stocks jumped by 6.8 million barrels last week. Analysts were looking for a build of 100,000 barrels, according to Reuters.
"Clearly this was a much bigger number than the market was expecting," Scott Hanold, energy analyst at RBC Capital Markets, told CNNMoney.com "We've obviously had a lot of pressure put on oil prices here and I think you'll continue to see some added pressure here."
The build in crude stocks was helped in part by a surge in crude imports, which averaged 11.1 million barrels per day last week, up nearly 1.6 million barrels per day from the previous week.
The data were released a day later than usual because of the U.S. holiday on Monday.
Distillates, used to make heating oil and diesel fuel, climbed 900,000 barrels, compared to expectations for an increase of 1.9 million barrels in distillate supplies.
Gasoline supplies rose by 3.5 million barrels, exceeding expectations for a build of 2.2 million in gasoline stockpiles.
Peter Beutel, an oil analyst at Cameron Hanover, said there was a bullish element within the weekly inventory report, pointing at U.S. gasoline demand, which is up 1.2 percent from the same period last year.
"For this time of year we normally see gas demand drop very substantially, but that has not happened this year," said Beutel. "It is a factor that is somewhat bullish for the market."
Oil prices have tumbled in recent weeks, hitting a 20-month low near $50 a barrel Wednesday, after Saudi Arabia said OPEC production cuts were working and an emergency meeting of member countries was unnecessary.
Warm weather, high inventories and a slowing economy have been largely to blame, while some speculative money has poured out of the market.
Even though some firms that deal in energy trading, such as Goldman Sachs, have trimmed their 2007 forecast for crude prices, many economists are still betting that oil prices will average above $60 a barrel this year.
The decline in crude prices, which are down some 35 percent from the record highs hit last summer, has also comforted markets on speculation that inflation pressures will begin to ease.
Gasoline prices have been slow to follow crude's recent decline, but they have turned lower recently. As of Thursday, the average U.S. retail price for a gallon of regular unleaded gasoline was $2.209, down nearly a dime from $2.306 last month, according to AAA.
Stocks of oil majors, including BP (up $0.02 to $63.61, Charts), ExxonMobil (down $0.50 to $71.96, Charts), ConocoPhillips (down $0.94 to $62.61, Charts), Chevron (up $0.10 to $70.92, Charts) and Royal Dutch Shell (down $0.13 to $68.11, Charts), have followed crude prices lower, and the AMEX oil and gas index is down 5.6 percent so far this year.