Oil drops as demand falls amid supply growth expectations

NEW YORK – Oil prices fell more than $3 a barrel Tuesday as the market absorbed data showing demand is falling even as supplies are rising. Gas prices inched higher at the pump, continuing their record-breaking press toward $4 a gallon.

A monthly Energy Department report said demand for finished petroleum products dropped 8.5 percent in February from January, and demand for gasoline fell by 6.2 percent. Though some of that drop can be attributed to February’s being a shorter month, it still suggests high prices are cutting American’s appetite for fuel.


“That’s a dramatic drop,” said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos.

At the same time, a British refinery strike that raised concerns about supplies ended Tuesday, and analysts surveyed by Platts expect the Energy Department’s weekly inventory report on Wednesday to show domestic crude supplies rose last week.

“The two combined (rising supplies and falling demand) do not bode well for $120 oil,” Rafield said.

AP