NEW YORK — Oil prices retreated for a second day Wednesday as concern grows over whether American consumers will spend more on energy in a sluggish economy.
Benchmark crude for September delivery fell $2.23 to settle at US$78.02 a barrel on the New York Mercantile Exchange. The U.S. Energy Department said crude oil stockpiles fell more than expected last month while gasoline inventories grew by 400,000 barrels to 355 million barrels. Demand for gasoline over the last four weeks was about 3.3 per cent higher than a year ago, but that includes the season when vacationers and teens on summer breaks join commuters on the roads.
With supplies fairly substantial, “it doesn’t give traders a warm and fuzzy feeling for the fall,” said Michael Lynch, president of Strategic Energy & Economic Research. It could, however, translate into lower prices at the pump for U.S. motorists.
Traders also are concerned about rising stockpiles of distillate fuel, which includes heating oil and diesel fuel. The Energy Information Administration said those inventories rose 3.5 million barrels to 173.1 million barrels last week.
The plentiful supply could be another sign of a sluggish economy because diesel fuels the trucking industry, Lynch said.
“And it implies refiners will cut back even more and that will put a lot of pressure on crude,” he added. A string of grim economic reports added to concerns about demand for oil and gas. The government said the U.S. trade deficit surged in June to the highest level since October 2008. While imports of foreign consumer goods hit an all-time high, U.S. exports faltered. The International Energy Agency predicted global oil demand will increase 2.2 per cent this year and continue to strengthen in 2011. It also said the short-term economic outlook “is highly uncertain” and that significant risks to oil demand growth remain.
In China industrial growth slowed in July in another indication that the Asian giant’s economic growth is cooling off.