Oil falls below $90 a barrel after big jump in US supplies; pump price drops for 7th day

NEW YORK, N.Y. – The price of oil fell below US$90 a barrel Wednesday after the U.S. government said that crude supplies are now 10 per cent higher than a year ago.

At midday, benchmark West Texas Intermediate crude for April delivery was down 79 cents to US$90.03 a barrel on the New York Mercantile Exchange. It fell as low US$89.55 after the government reported a big increase in the nation’s stockpile of oil.

U.S. oil supplies grew last week by 3.8 million barrels, or 0.4 per cent, the Energy Department’s Energy Information Administration said in its weekly report. Analysts expected an increase of 1.1 million barrels. At 381.4 million barrels, the nation’s supply of crude is 10.3 per cent above year-ago levels.

Falling oil prices have spelled some relief for U.S. drivers. The average price of a gallon of gas fell for a seventh straight day, to US$3.73 a gallon. That’s still up 21 cents from a month ago, but down 3 cents from this time last year.

The death of Venezuela President Hugo Chavez had little immediate effect on the price of oil. The full impact of his death may not be felt until Venezuela, which sits on the world’s second-largest oil reserves, picks a new leader — one who might choose a course different from Chavez. Elections are expected to be called within a month.

Chavez, who died Tuesday after a two-year battle with cancer, oversaw a decline in oil production during his 14 years as the leader of Venezuela. In the short-term, traders will watch for any disruption to Venezuela’s production. Longer term, they’ll want to see if the new government invites foreign investment in Venezuela’s oil industry and is able to boost output.

Brent crude, used to price many kinds of oil imported by U.S. refineries, fell 76 cents to US$110.85 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex:

— Wholesale gasoline dropped 2 cents to US$3.13 a gallon (3.79 litres).

— Heating oil slipped 1 cent to US$2.97 a gallon (3.79 litres).

— Natural gas lost 4 cents to US$3.49 per 1,000 cubic feet.

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Pamela Sampson in Bangkok and Pablo Gorondi in Budapest contributed to this report.