Oil prices rebounded today, jumping back to $116 a barrel after the government reported a bigger-than-expected drop in U.S. gasoline supplies supplies. But...
NEW YORK — Oil prices rebounded today, jumping back to $116 a barrel after the government reported a bigger-than-expected drop in U.S. gasoline supplies. But more signs of dwindling U.S. demand cast doubt on the rally’s longevity.
At the pump nationwide, a gallon of regular gasoline shed on average another penny overnight to $3.787, according to auto club AAA, the Oil Price Information Service and Wright Express. That’s nearly 8 percent lower than record prices above $4 a gallon reached last month, but still 37 percent higher than a year ago; retail gasoline prices tend to lag behind crude oil’s moves by several weeks.
In its weekly inventory report, the Energy Department’s Energy Information Administration (EIA) said gasoline supplies fell by 6.4 million barrels to 202.8 million barrels for the week ended Aug. 8, nearly three times more than the 2.2 million barrel drop analysts surveyed by energy research firm Platts had expected.
The big drop in gasoline stocks prompted traders to buy oil and gasoline contracts on signs of supply tightness. However, analysts said the surprisingly large drawdown suggests that U.S. refineries are scaling back on production in response to falling demand — not that Americans are suddenly driving more because of easing pump prices.
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“There’s no doubt that refiners are making less gasoline,” said Phil Flynn, analyst at Alaron Trading in Chicago. “The demand is bad so why store a product that you’re going to have trouble selling?”
Gasoline futures also jumped, with the September contract adding 8.91 cents to settle at $2.9323 a gallon on the Nymex.
Despite the rebound, analysts doubted crude would regain the upward momentum seen last month, noting that traders have been quick to cash in on oil rallies in recent weeks and send prices lower.
“We’ve got a good-sized rally … but it still doesn’t feel like it’s sustainable. We’re not seeing the frenzy of buying that we would have seen a couple months ago,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
“I think the true underlying demand weakness is still out there,” he added, saying he believed that Americans were not yet reacting to easing pump prices by driving more. “I don’t think people are going to change their commuting habits that fast.”
The EIA said demand for gasoline over the four weeks ended Aug. 8 was almost 2 percent lower than a year earlier, averaging 9.4 million barrels a day.