NEW YORK (AP) — Oil dove again Wednesday, the latest in a series of declines that has pushed the price down by $10 a barrel over two weeks.
This time, it was an Energy Department report that suggested more drivers are staying home, giving them no reason to fill up their tanks.
That actually works to the benefit of those who are hitting the gas station. The average price of gas has dropped 11 cents since April 1 and could fall further.
Oil dropped $2.04, or 2.3 percent, to close at $86.68 in New York. Brent crude, which is used to price oil used by many U.S. refiners, dropped $2.22, or 2.2 percent, to $97.69, the lowest level since July.
Fundamentally, there's been little support for oil prices. Forecasts for global oil demand have fallen at a time of ample supplies. Economic reports from the U.S., China and Europe have been disappointing. Wednesday was the fourth drop of at least 2 percent in April.
U.S demand for gasoline during the four weeks ended April 12 was 3.3 percent less than a year earlier, averaging 8.4 million barrels a day, according to the Energy Department. That's the lowest demand for the second week in April since 1997, according to Tom Kloza, Chief Oil Analyst at Gasbuddy.com. Demand for other fuels, such as diesel and heating oil, was also tepid.
"This is a serious slump," Kloza said.
Meanwhile, U.S. gasoline supplies are 3.6 percent higher than they were a year ago, according to the Energy Department.
Lower gasoline demand and lower oil prices have led to lower gasoline prices for U.S. drivers. The average U.S. retail gasoline price is now $3.52 per gallon, according to OPIS, AAA and Wright Express. Prices have declined steadily since late February, when the average price hit a high for the year of $3.79 per gallon.
The drop in pump prices may continue. Gasoline futures fell 5 cents, or 1.7 percent, to $2.73 per gallon Wednesday. Futures prices help set the price that distributors and station owners pay for wholesale gasoline. Those wholesale prices are then used to determine retail prices.
The surprise drop in gasoline demand followed a series of weak economic reports around the world, starting with a disappointing U.S. employment report two weeks ago. This week, a report of slower-than-expected economic growth in China helped trigger a broad sell-off in commodities that included the biggest one-day drop in the price of gold in 30 years.
The prospects for a recovery in Europe remain dim. On Tuesday, the International Monetary Fund said it expects the combined economy of the 17 eurozone countries to shrink 0.3 percent in 2013. The IMF also lowered its outlook for world economic growth this year to 3.3 percent from its January forecast of 3.5 percent. It predicts U.S. economic growth of 1.9 percent this year, down from a January estimate of 2.1 percent.
When economic growth slows, drivers, shippers and travelers consume less gasoline, diesel and jet fuel.
In other futures trading on the New York Mercantile Exchange:
— Heating oil fell 7 cents to $2.73 a gallon.
— Natural gas rose 5 cents to $4.21 per 1,000 cubic feet.
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- Energy Department