Oil prices continued their two-week slide on Wednesday after a government report showed demand for crude products dropped even further from the weak levels of a year ago when the recession's grip on the economy was strongest.
Benchmark crude for March delivery fell US$1.04 to settle at $73.67 a barrel on the New York Mercantile Exchange. That's the lowest settlement price since Dec. 14, when crude dipped to $73.46.
Wholesale prices for natural gas, heating oil and gasoline also tumbled.
Oil prices initially moved slightly higher after the Energy Information Administration reported a big decline in crude inventories last week. But once traders realized that foggy weather and high seas in the Gulf of Mexico, as well as an accident at a southeast Texas port, probably slowed deliveries and accounted for the drop, the focus turned to the lack of demand.
The EIA report showed demand for gasoline fell 0.8 per cent over the four weeks ended Friday compared with a year ago and that demand for distillates used for heating oil and diesel fuel is off 8.1 per cent.
"People were expecting a better number with the recovery," said Michael Lynch of Strategic Energy and Economic Research.
Even though the economy has pulled out of recession, unemployment remains stubbornly high at levels last seen more than a generation ago. Industrial production is still weak. That has undercut demand for of all kinds of energy - from natural gas to run factories and power plants to gasoline for weekend trips and vacations.
Analyst and trader Stephen Schork said it's hard to imagine demand being lower than a year ago. "That is when we were in the abyss," he said.
Schork wondered whether the move to more fuel-efficient vehicles could also be part of the reason for lower demand.
Oil prices are about double what they were a year ago and hit a 15-month high earlier this month even though consumption has been awful. Valero, the nation's biggest refiner, reported Wednesday that it lost almost $2 billion in 2009 as it struggled to pass on higher oil prices to consumers.
Weak has pushed Valero and other refiners to shut some operations.
"Both refinery utilization and crude oil imports are at figures only seen previously after hurricanes, going back over the last two decades or more," Peter Beutel of Cameron Hanover said in a report Wednesday.
After hitting a 15-month high along with oil prices earlier this month, retail gasoline prices continued to slide.
Price fell 0.5 cents Wednesday to a national average of $2.695 per gallon, according to AAA, Wright Express and Oil Price Information Services. Prices are down 4.2 cents in the past week, but remain 9.2 cents above month-ago prices and 85.5 cents higher than prices a year ago.
In Canada, the price at the pump averaged C$1.009 per litre, up from 97 cents per litre a month ago, according to price-watching website GasBuddy.com.
In other Nymex trading in February contracts, heating oil fell 3.4 cents to settle at US$1.9168 a gallon, while gasoline dropped 2.82 cents to settle at $1.9392 a gallon. Natural gas futures slid by 21.1 cents to settle at $5.274 per 1,000 cubic feet.
In London, Brent crude for March delivery gave up $1.05 to settle at $72.24 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.