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Benchmark price around $101 per barrel after US gov't reports growing supplies of crude
NEW YORK (AP) ' Oil prices dropped Wednesday, as weak U.S. energy demand pushed petroleum supplies sharply higher.
Benchmark crude fell by $1.15 to $101.08 per barrel in New York. Brent crude, which is used to price foreign oil varieties that are imported by U.S. refineries, fell 80 cents to $112.48 per barrel in London.
The Energy Information Administration's weekly report on petroleum supplies showed gasoline demand fell by 4.8 percent last week from a year ago, while demand for all petroleum products dropped by 6.5 percent.
As consumers and businesses cut back, producers put more into storage than analysts expected. Oil supplies rose by 5 million barrels last week while gasoline supplies grew by 3.6 million barrels. Distillate supplies ' including diesel and heating oil ' increased by 4 million barrels. Analysts had expected oil supplies to shrink by a million barrels last week, with gasoline and distillate supplies rising by 1.75 million and 1.35 million barrels, respectively.
Oil prices began falling early in the day after Germany said its economy contracted in the final three months of 2011.That raised concerns about the rest of Europe's economy. Germany, the eurozone's strongest member, is expected to prop up its neighbors as they work to overcome massive government debts. If the region slides into recession, oil demand will likely decline.
Natural gas prices plunged 5 percent as a mild winter in most of the U.S., combined with increased North American production, has kept supplies high. The futures contract, which on Wednesday lost 17 cents at $2.77 per 1,000 cubic feet, is at the lowest level in a decade for this time of year.
"There's just too much gas out there, and there's no evidence that people are shutting in gas production yet to compensate," said Ron Denhart, an analyst with Strategic Energy & Economic Research.
Denhart said that the energy industry has been increasing natural gas production by about 5 percent per year, while U.S. consumption has been growing by just 1 to 2 percent per year.
In other energy trading, heating oil lost less than a penny at $3.10 per gallon and gasoline futures gave up 2 cents at $2.75 per gallon.