Oil sinks below $99

Government report stokes fears of softening demand and crude traders see little benefit from bailout plan.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Ben Rooney, CNNMoney.com staff writer

Should the House reconsider its rejection of the $700 billion economic recovery bill?
  • Yes
  • No
click the chart to see current oil price

NEW YORK (CNNMoney.com) -- The price of oil fell Wednesday after a key inventory report highlighted concerns about waning demand and doubts emerged about the impact of the government's proposed bailout plan.

Light, sweet crude for November delivery fell $2.11 a barrel to settle at $98.53 on the New York Mercantile Exchange.

The contract tumbled more than $5 a barrel shortly after the Energy Department said supplies of crude oil and gasoline unexpectedly rose last week, suggesting that demand in the U.S. remains weak.

The market recovered from its "knee-jerk selloff," said Stephen Schork, oil industry expert and publisher of the Schork Report. But Wednesday's data suggest that the "downward trend in crude prices will continue."

Inventory report. The Energy Information Administration said Wednesday morning that the nation's supply of crude oil increased by 4.3 million barrels last week. Crude stocks were expected to have gained or lost 1.5 million barrels, according to a consensus estimate of industry analysts surveyed by energy information provider Platts.

Gasoline supplies grew by 900,000 barrels, surprising analysts who had forecast a decline of 1 million to 2 million barrels.

But Schork said last week's growth in gasoline supplies was not consistent with the overall trend.

"Given the ongoing demand destruction, expect to see more draws in gas," he said.

Demand for gasoline over the four weeks ended Sept. 26 was down 4.5% from the same period last year, according to the EIA.

The EIA report also showed that oil products supplied over the last four-week period averaged 19 million barrels a day. That's down 7.1% compared to the similar period last year.

"Demand was anemic," said John Kilduff, energy analyst at MF Global in New York. And the EIA report "speaks to the lack of economic activity in the U.S."

Supplies of distillates, used to make diesel fuel and heating oil, fell by 2.3 million barrels. Analysts were expecting distillate stocks to decline 1 million to 2 million barrels, according to Platts.

Meanwhile, the nation's refineries operated at 72.3% of their operable capacity last week, up from 66.7% the week before.

Bailout doubts. The price of oil has been pressured recently by concerns that a global economic slowdown will undercut demand for petroleum products.

"Confidence in U.S. economy, the U.S. banking sector and the global economy is severely shaken," said Schork. "I cannot see a reason to own $100 oil at this time."

In response to the nation's economic strife, the Bush Administration has proposed a massive intervention in the financial system. But the controversial plan met with strong opposition from the public and was scuttled in the House of Representatives on Monday.

Senate lawmakers are expected to vote on a modified version of the bailout plan Wednesday evening.

Supporters of the intervention say it is a critical first step in stabilizing the financial markets and reinvigorating the nation's economy.

However, several analysts expressed doubts that a bailout would have a significant impact on the price of oil.

"I'm not sure the reaction [to the plan] will be overwhelmingly enthusiastic," Kilduff said.

The economic outlook for the U.S. is grim, Kilduff said. And the bailout may not be enough to spur sustained demand for oil and gas.

"We've still got a lot of work to do," Kilduff said.

Gasoline. The government data come as prices at the pump continue to fall.

A daily survey by the American Automobile Association showed Wednesday that the national average price for a gallon of regular gas fell to $3.619 from $3.633 the day before.

Gas prices have dropped dramatically from mid-summer's highs and are now 12%, or 49 cents, less than the record of $4.114 a gallon set on July 17.

Diesel prices, meanwhile, held steady overnight at $4.078 a gallon.  To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.