Chron - 25/5/2006

Oil prices fell by almost $2 a barrel Wednesday after weekly government data showed rising supplies of gasoline and flat demand.

Michael Guido, director of commodity strategy in New York for Societe Generale, said the recent softening of demand for gasoline suggests pump prices — now averaging $2.87 a gallon — are having an impact on consumer behavior. Moreover, the high prices are encouraging record gasoline imports, Guido said.

"I wouldn't be surprised to see the market move down into the mid-$60 range from here," Guido said.

However, the federal Energy Information Administration predicted that the average gasoline price at the pump won't fall below $2.60 throughout the entire summer "even absent any damage due to hurricanes or additional crude oil supply disruptions overseas."

Light, sweet crude for July delivery fell $1.90 to settle at $69.86 a barrel Wednesday on the New York Mercantile Exchange, where June gasoline futures declined by 8.9 cents to finish at $2.019 per gallon. Trading natural gas futures fell 29.4 cents to finish at $5.964 per million British thermal units. Heating oil fell 5.87 cents to $1.9402 a gallon.

In London, Brent crude for July delivery lost 58 cents to $70.42 a barrel on the ICE Futures exchange.

The weekly petroleum snapshot from the Energy Department showed crude oil inventories declined by 3 million barrels last week to 343.9 million barrels, or 3.6 percent above last year.

Gasoline inventories grew by 2.1 million barrels to 208.5 million barrels, or almost 3 percent below last year, while supplies of distillate, which include diesel and heating oil, increased by 2.5 million barrels to 117.1 million barrels, or 8 percent more than a year ago.

Over the past four weeks, gasoline demand averaged 9.24 million barrels per day, just a hair above year-ago levels, suggesting higher pump prices may be having an impact on consumption.

Oil prices had risen Tuesday as scientists' predictions about the Atlantic hurricane season and a fire at a Louisiana refinery renewed concerns about potential supply disruptions in the Gulf of Mexico. Experts said the upcoming season should be an active one, but is unlikely to be as strong as in 2005.