Energy prices dropped today (Dec. 30) after the government said oil and natural gas supplies fell less than expected last week, The Associated Press reported.
Benchmark crude for February delivery lost $1.94 at $89.18 per barrel. It was the first time in a week that oil was below the $90 mark.
Oil has been surging for most of December as U.S. petroleum consumption ticked higher and traders looked forward to 2011, when oil is expected to touch $100 per barrel and perhaps go higher.
Rising oil prices have pushed gasoline pump prices higher. They were up again today. The national average for a gallon of regular hit $3.07, about six cents higher than a week ago and 45 cents more than a year ago. Drivers across the country pay a range of prices at the pump. In California you’ll pay about $3.32 a gallon. In New York gas goes for around $3.30 a gallon. The average is $2.91 in Texas and $2.82 in Colorado.
Some analysts think the national average will hit $3.75 by spring.
The price of benchmark crude tumbled today after the Energy Department’s Energy Information Administration (EIA) weekly supply report. The EIA said oil supplies declined by 1.3 million barrels last week. A drop in supplies often supports higher prices, but analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., thought the drop would be bigger — around 3.2 million barrels.
Investors worried that the report showed demand for energy was not picking up, despite positive economic news. The Labor Department today said the number of people applying for unemployment benefits fell to 388,000, the lowest level in almost 2 1/2 years.
Meanwhile, Freddie Mac said a fixed-rate 30-year mortgage rose to 4.86%, the highest since May. That raised concerns about whether higher mortgage rates would slow the recovery of the housing market.
The EIA also released its weekly report on the nation’s natural gas supplies, which showed they shrank by 136 billion cubic feet. That’s less than analysts expected and a relatively small dent in total supplies of more than 3.2 trillion cubic feet, eight percent above the five-year average. Milder weather across most of the country over the next 10 days should reduce heating demand and keep a lid on natural gas prices.