Newspaper article THE JOURNAL RECORD

Oil, Natural Gas Futures Drop

Newspaper article THE JOURNAL RECORD

Oil, Natural Gas Futures Drop

Article excerpt

NEW YORK (Bloomberg) -- Crude oil futures prices fell more than 4 percent Wednesday as an unexpectedly large increase in U.S. inventories last week dashed hopes for a narrowing of a supply surplus that sent prices to a 12-year low in December.

Natural gas futures fell almost 3 percent.

The inventory gain, the biggest since October, left U.S. supplies 6 percent higher than a year earlier, the American Petroleum Institute said Wednesday. Prices surged last week as an API report of tumbling inventories and cold weather demand for heating fuel led to speculation that supplies would keep falling. "The API's did scotch a lot of hope," said Bill O'Grady, an analyst at A.G. Edwards & Sons in St. Louis. "Crude is in a lot of trouble," and prices will fall even more, he said. February crude oil fell 58 cents, or 4.5 percent, to $12.31 a barrel on the New York Mercantile Exchange, the biggest one-day drop since Dec. 17. Crude oil prices, which touched a 12-year low of $10.35 a barrel on Dec. 21, rose 12 percent in the four days after the report of the big inventory decline during the week ended Jan. 1. A world supply glut that producers have been unable to erase with output reductions has kept oil prices 25 percent lower than a year ago. There was some expectation for a stabilizing of U.S. inventories after the large decline two weeks ago, even though much of that drop was attributed to end-of-year reductions for tax purposes. O'Grady said he expects U.S. inventories to rise further in coming weeks, sending crude oil below $9.75 a barrel, the record low on the Nymex, by the end of the month. The 3.1 million, or 1 percent, gain in U.S. crude oil inventories last week exceeded the increase of 900,000 to 2.1 million barrels expected, on average, by analysts surveyed by Bloomberg News before the report. Gasoline inventories rose 6.8 million barrels, or 3.2 percent, the API said after trading ended Tuesday, the largest weekly gain in almost nine years. …

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