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Oil drops near $86 a barrel on US demand concerns

The Associated Press

NEW YORK (AP) -- More signs of weak demand for fuel in the U.S. sank the price of oil by nearly 3 percent.

The Energy Department said Wednesday that demand for gasoline over the four weeks ended April 12 was 3.3 percent less than a year earlier, averaging 8.4 million barrels a day. The weekly reported indicated that use of distillates like heating oil and diesel was light as well.

In afternoon trading benchmark oil for May delivery was down $2.51, or 2.8 percent, to $86.21 a barrel on the New York Mercantile Exchange.

The Energy Department said gasoline supplies fell last week by 600,000 barrels, only half the amount expected by analysts. At 221.7 million barrels, the nation's supply of gasoline is 3.6 percent above year-ago levels. Wholesale gasoline futures dropped 7 cents to $2.71 a gallon.

In addition, supplies of distillate fuel posted a surprise increase of 2.4 million barrels. Analysts expected a decline of 850,000 barrels.

The drop in demand follows some weak U.S. economic data, starting two weeks ago with a disappointing employment report.

Oil has fallen sharply in the past week, part of a broad sell-off in commodities that included gold recording its biggest one-day drop in 30 years, due mainly to lower-than-expected growth in China during the first quarter of the year. Oil is now down about $8 a barrel, or nearly 9 percent, since last Wednesday.

On Tuesday the International Monetary Fund lowered its outlook for world economic growth this year to 3.3 percent from its January forecast of 3.5 percent. It expects U.S. economic growth of 1.9 percent this year, down from a January estimate of 2.1 percent, while the IMF sees the combined economy of the 17 eurozone countries shrinking 0.3 percent in 2013.

Brent crude, which is used to price oil used by many U.S. refiners to make gasoline, was down $2.20, or 2.2 percent, to $97.71 a barrel on the ICE Futures exchange in London on Wednesday.

In other futures trading on the Nymex:

— Heating oil lost 7 cents to $2.73 a gallon.

— Natural gas rose 4 cents to $4.20 per 1,000 cubic feet.


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