NEW YORK (AP) - Gasoline futures tumbled almost 8 percent Wednesday after a government report showed the strongest evidence yet that higher pump prices are forcing Americans to drive less. Oil also dropped back below the US$100 mark.
The CME Group, which owns the Nymex, suspended trading in energy contracts for five minutes after the gasoline contract dropped by more than 25 cents.
The Energy Information Administration said that U.S. gasoline demand dropped 2.4 percent last week, the largest drop in seven consecutive weeks of declines. Analysts said motorists are buying less gas with pump prices close to a national average of $4 per gallon (3.79 liters).
"That $4 number is not just having a psychological impact, but a direct impact on drivers," energy consultant Jim Ritterbusch said. "Normally, with the economy recovering, you'd expect gasoline demand to go up, but that's not happening."
With the three-day Memorial Day holiday less than three weeks away, analysts now expect that, at most, motorists will use about as much gasoline this summer driving season as they did in 2010.
"My opinion is that they started cutting back when prices hit $3.50" per gallon (3.79 liters), oil analyst Andrew Lipow said. "We haven't seen the full effect of that just yet." The national average for a gallon of regular reached $3.50 on March 6.
It's now at $3.96 after reaching $3.98 per gallon (3.79 liters) last week. Gas rose mostly because of higher oil prices, but also because of a large number of refinery outages.
The EIA data showed that gasoline supplies increased by 1.3 million barrels last week even with a decline in refining activity around the country. Gasoline for June delivery plunged, losing 25.69 cents to settle at $3.1228 per gallon (3.79 liters) on the Nymex.
Gas supplies typically decline in the spring as refineries purge their stocks of winter fuels. This year supplies fell more than expected as fires, power outages and other problems temporarily knocked refineries out of commission.
Gasoline futures had risen Tuesday on concerns that flooding could impact some refineries along the lower Mississippi River, analysts said. However, none of the 10 major refineries located there reported problems Wednesday. They were preparing emergency measures just in case.
Valero Energy Corp. said it was securing loose equipment and moving some parts to higher ground. Exxon was lining its 504,000-barrel-per-day facility in Baton Rouge, Louisiana, with sand bags. Royal Dutch Shell, which either owns or partners in three refineries on the lower Mississippi, planned to move refined products by rail and truck if necessary.
Lipow said he thinks refineries probably won't be damaged by the flood, although the rising Mississippi could damage docking stations and keep barges and oil tankers from moving upstream.
"There's going to be a logistics and distribution problem for a while," he said. "I'd say, probably, all the refineries in the Baton Rouge area will still have access to crude oil via pipeline."
Authorities at the Port of New Orleans said river traffic along the lower Mississippi remained at normal levels and they don't expect any significant impact from flooding.
Gasoline pump prices increased on Wednesday by almost a penny to $3.962 per gallon (3.79 liters). It's the first rise in six days. A gallon of regular is 19.2 cents more expensive than a month ago and $1.061 higher than the same time last year. Analysts still expect gas prices to drop by 30 or 40 cents a gallon by the end of the month. Wednesday's pullback in futures contracts appeared to support that forecast.
The drop in gasoline futures pulled oil down with it, since oil is used to make gasoline. Benchmark crude dropped $5.67, or 5.5 percent, to settle at $98.21 per barrel on the Nymex. In London, Brent crude lost $5.06, more than 4 percent, to $112.57 per barrel on the ICE Futures exchange.
Oil supplies grew last week by 3.8 million barrels, more than twice as much as what analysts expected. Demand for petroleum products fell last week when compared with levels from a year ago.
OPEC said earlier in the day that forecasts for world demand have been clouded by changing economic conditions in the U.S. and the aftermath of the Japanese earthquake and tsunami. The 12-nation bloc of oil producers increased its forecast for oil consumption in 2011, though much of that increase was due to unexpectedly strong demand growth in China. OPEC said global demand should rise by about 1.4 million barrels per day this year.
In other Nymex trading for June contracts, heating oil lost 10.29 cents to settle at $2.8983 per gallon (3.79 liters) and natural gas lost 6.2 cents to settle at $4.241 per 1,000 cubic feet (28.32 cubic meters).
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