Oil prices fall on rising U.S. stockpiles

COLUMBUS, Ohio – Oil prices rose in volatile trading today after the U.S. government reported enormous buildups of oil and gasoline at U.S. storage depots, another manifestation of how badly the deteriorating economy has cut into energy demand.
Including the latest report from the Department of Energy, crude inventory levels have risen by 14 million barrels since the week ended Jan. 2, pushing operational capacity at key storage sites to the limit.
Prices tumbled seven per cent before a late day rally, with light, sweet crude for March delivery settling up 12 cents at US$43.67 on the New York Mercantile Exchange.
Crude fell early in the day after the Commerce Department reported that new-home construction plunged to an all-time low in December. There was also more evidence that export-driven economies in Asia are being hit hard by the recession. Oil inventory data pushed prices even lower before oil prices and the stock market rallied.

Even with the jump in crude supplies, prices at the pump edged up again overnight as refiners cut back production in reaction to falling demand.
The Energy Department's Energy Information Administration said for the week ended Friday crude inventories rose by 6.1 million barrels, or 1.9 per cent, to 332.7 million barrels.
Analysts had expected a boost of only 1.9 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The same report showed how much less Americans are driving as the recession reaches across almost every economic sector in the country.
Gasoline inventories rose by 6.5 million barrels, or three per cent, to 220 million barrels, more than three times what was expected by analysts.
U.S. refineries have begun shutting operations for regular maintenance, and are also trying to match rapidly falling demand ran at 83.3 per cent of total capacity on average, a drop of 1.9 per cent from the prior week and also more drastic than what was expected.

That sent gasoline futures tumbling close to 10 per cent at one point today.
Many consumers have been frustrated by the disparity between crude prices, which has been on the decline, and retail gasoline prices, which have been rising for weeks.
The EIA report confirms that stocks continue to build as demand falls.


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