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The price of oil wavered around $114-a-barrel level Wednesday (Aug. 20) after the government reported a massive increase in the nation’s crude supplies amid a slowdown in fuel demand.
The Associated Press reported that the Energy Information Administration (EIA), an arm of the U.S. Energy Department, said crude inventories rose by a hefty 9.4 million barrels in the week ended Aug. 15, after a big gain in imports. The figure came in much higher than the average analyst forecast for a 1.7 million-barrel increase, according to energy information provider Platts.
U.S. fuel supplies are not abundant across the board – gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels, the EIA said. However, the decrease was not a major concern on Wednesday to traders, who have been focusing on weakening demand in the United States. Gasoline demand averaged about 9.5 million barrels per day over the last four weeks, or 1.6% lower than the same period last year, the EIA said.
The dollar also rose against most currencies on Wednesday, giving traders an extra reason to exit commodities.
Few market watchers, however, were discounting the possibility of nervousness returning to the oil markets and bumping prices up again.
“Consumers can take some solace in the sell-off, but there are more supportive factors down the road here,” said John Kilduff, senior vice president of risk management at MF Global LLC in New York.
Since mid-July, crude prices had pulled back by about $35, or nearly 25%, from their July 11 trading record of $147.27. The retreat arrived as the dollar recovered ground against other major currencies, and as evidence emerged that Western Europe’s and Japan’s economies are weakening alongside that of the United States – which could put a damper on global energy demand.
As crude prices have fallen, so have gasoline prices. The average U.S. retail price for a gallon of gasoline was at $3.717 on Wednesday, down more than a penny from Tuesday and down nearly 10 percent from the July 17 record of $4.114, according to auto club AAA, Oil Price Information Service and Wright Express.