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Oil Gives Up Most of Its Gains For the Week
September 29, 2011

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New York. Oil gave up almost all of its gains for the week as the US and Europe appeared to have little appetite for more fuel.

Western countries already were expected to see declining demand as their economies struggle to grow. Those concerns grew Wednesday when the US reported unexpectedly large crude supplies and weak gasoline demand. In Europe, German Chancellor Angela Merkel suggested that a bailout package for Greece might have to be renegotiated.

“Any resolution in Europe is likely going to result in lower spending,” independent oil analyst Andrew Lipow said. “That means lower growth rates and poorer demand for oil.”

Benchmark crude fell $3.24, nearly 4 percent, to end the day at $81.21 per barrel in New York. That wiped out big increases on Monday and Tuesday. Benchmark crude rose more than 5 percent on Tuesday alone. Brent crude, which is used to price most international oil varieties, lost $3.33, or 3.1 percent, to finish at $103.81 in London.

For more than a month, benchmark oil prices have been pulled in opposite directions as analysts and traders try to gauge future petroleum demand. Investment banks like Goldman Sachs continue to warn of supply shortages and have predicted rising oil prices for years to come. Still, investors have kept a worried eye on weak demand in the West, Europe’s debt crisis and the chances of the US sliding into another recession.

The result has been a relatively steady price range for crude between $79 and $90 per barrel since early August.

Oil rose sharply earlier this week as Europe appeared to get a better handle on its debt crisis. But signs of disagreement resurfaced among European leaders and reignited fears of a Greek default and a widening financial crisis in Europe.

Traders also turned their attention back to the US, the world’s largest petroleum consumer, where petroleum consumption continues to fall. The Energy Department reported Wednesday that gasoline demand last week dropped 2.4 percent from the same time last year. US crude supplies grew by 1.9 million barrels last week. Analysts thought oil supplies would remain unchanged.

Falling demand for oil and gas in the US is one of the reasons that ConocoPhillips said this week it wants to sell its refinery in Trainer, Pennsylvania. Two other refineries in the state also are up for sale as Sunoco exits the refining business. Experts say the East Coast will probably be forced to import more fuel to make up for the loss of gasoline and diesel production.

“There’s still a lot of weakness in the US,” said Michael Lynch, president of Strategic Energy & Economic Research.

A decline on Wall Street helped push oil prices lower on Wednesday. The Dow Jones industrial average, the Standard & Poor’s 500 and the Nasdaq composite all fell more than 1 percent.

Associated Press