1/7/2009 4:13:51 PM Crude oil dropped sharply on Wednesday after the Energy Department reported weekly inventories that grew much more than predicted. Light sweet crude for February delivery finished at $42.63, down $5.95 for the day. Oil dipped as low as $42.41.
U.S. commercial crude oil inventories increased 6.7 million barrels from the previous week. This is much greater than the expected build of around 1 million barrels. At 325.4 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year.
Total motor gasoline inventories increased by 3.3 million barrels last week, and are in the middle of the average range. Experts were looking for a build of 1 million barrels.
Weak employment data also hurt the outlook for energy demand. An Automatic Data Processing report showed that non-farm private employment fell by 693,000 jobs in December following a revised decrease of 476,000 jobs in November. Economists had been expecting the report to show a somewhat more modest decrease of about 450,000 jobs.
Crude hit a five-week high of $50.47 on Tuesday as traders considered reports that members of the Organization of Petroleum Exporting Countries are following through with output cuts, as planned last month. In December, OPEC announced a cut of 2.2 million barrels per day, effective Jan. 1 in response to rapidly plunging prices amid demand concerns.
At the pump, gasoline prices inched up to $1.727 on average across the U.S. for a regular unleaded gallon. This is higher than the month-ago mark of $1.716 but well below last year's level of $3.105.