Crude prices drop more than $2 a barrel after government reports rise in crude stocks for last week.
By Kenneth Musante, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Oil prices dropped below $48 a barrel Wednesday after a government report showed a build in unused crude supplies.
U.S. crude for May delivery was down $2.10 to trade at $47.56 a barrel. Oil had been trading at about $48.17 a barrel just before the report's release.
The Energy Department said crude stockpiles rose by 2.8 million barrels over the past week. Analysts have been worried about an oversupply of crude and had expected supplies to rise by 3.2 million barrels, according to a survey from Platts.
In each of the past five years, crude stocks have risen by an average of 2.5 million barrels in the 12th week of the year, according to Platts.
The government also reported the average demand for gasoline over the past four weeks was down 0.2% from the same period last year.
"Looking forward right now, demand looks pretty weak and supplies look pretty ample," said James Cordier, president of brokerage OptionSellers.com.
The government added that supplies of gasoline rose by 2.2 million barrels from the previous week; supplies of distillates, which are used to make diesel fuel and home heating oil, rose by 300,000 barrels; and refineries were operating at 81.7% of capacity.
Analysts had been expecting refinery use to rise 0.2 percentage points to operate at 82.2% of capacity, according to the poll. Experts had expected gasoline supplies to fall by 1.8 million barrels, and distillates to fall by 1.4 million barrels.
Many experts believe oil fundamentals are still very weak, and that prices may return to the mid-$40 range, despite a rally above $50 a barrel last week.
"I still think those old lows are going to be revisited," said Steve Brassey, senior broker with trading firm Sonic Futures.
Plummeting from a record high of $147.27 a barrel last year and with the global recession, other catalysts, besides supply and demand, have had a strong effect on the price of oil.
"The energy market seems to be quite reactive to the dollar and the equity markets," said John Kilduff, energy analyst with trading firm MF Global.
Investors have been looking to equities to gauge the health of the world economy and global oil demand, according to Kilduff.
The stock market rallied last week, but the Dow Jones industrial average has yet to close above 8000 points since February. The Dow was up about 1% during Wednesday trading.
Movements in the dollar also affect crude prices because, like most commodities, oil is traded in U.S. dollars. The dollar gained slightly against the euro on Wednesday.
Investors were looking ahead to Thursday to see if the European Central Bank will cut a key interest rate, which could affect the strength of the dollar, Killduff said.
Gasoline prices at the pump ticked down 0.1 cent Wednesday to a national average of $2.047 a gallon for regular unleaded, according to a survey from motorist group AAA. There are 42 gallons in a barrel.
Ford sales plunge
By Chris Isidore,
CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- Sales tumbled sharply at Ford Motor in March, as the healthiest Detroit automaker kicked off what is expected to be another round of brutal U.S. sales reports for the auto industry.
Ford's sales decline of 41% from a year ago was broad based, with declines of more than 30% across all the company's brands and vehicle types. The biggest drop was a 73% plunge in sales of SUVs.
Still, sales were up from January and February levels, two months when Ford failed to sell at least 100,000 vehicles for the first time in decades. Ford sold more than 125,000 vehicles in March.
And sales did not drop as much as the 50% decline forecast by sales tracker Edmunds.com. Ford said it believes it should even post a modest gain in market share in the month.
Nonetheless, the company disclosed that first quarter production ended 26,000 vehicles short of its most recent forecast. And production cutbacks are not over at Ford (F, Fortune 500), as it halted production at assembly plants in Kansas City and Chicago for the next three weeks.
The Kansas City plant is one of two that make its F-150 pickup, Ford's best-selling vehicle. The Chicago plant makes the Ford Taurus as well as Mercury and Lincoln vehicles. Ford spokeswoman Angie Kozleski said the shutdowns do not reflect a change in second quarter production targets, however.
Ford is the first major automaker to report its March sales. Others are due to report sales results later in the day Wednesday, with analysts forecasting a 40% to 43% decline in sales industrywide.
And Ford still finds itself in better shape than General Motors (GM, Fortune 500) and Chrysler LLC, which face the possibility of being forced into bankruptcy in the next 30 to 60 days unless they can make changes sought by the federal task force overseeing the $16.4 billion in loans those two companies have already received.
