Oil drops as demand hits lowest in 5 years

NEW YORK - Crude oil fell after a government report showed US fuel demand declined to the lowest in almost five years.

Consumption averaged 19.5 million barrels a day during the past four weeks, down 6.6 percent from a year earlier, and the lowest since October 2003, the Energy Department said yesterday in a weekly report. Oil and gasoline supplies dropped as refineries cut operating rates to the lowest in at least 19 years.

"Demand stinks," said Kyle Cooper, an analyst at IAF Advisors in Houston. "Prices have retreated a bit because of the demand number and because there's a flood of crude oil coming."

Crude oil for November delivery fell 88 cents, or 0.8 percent, to settle at $105.73 a barrel on the New York Mercantile Exchange. Prices rose as much as $2.89, or 2.7 percent, before the report's release at 10:35 a.m. in Washington.

Production platforms, refineries, and ports along the Gulf of Mexico were shut last week in the aftermath of hurricanes Gustav and Ike.

Ike made landfall near Houston, the largest US petroleum port, on Sept. 13. The Houston Ship Channel partly reopened to daylight transit by oceangoing tankers on Sept. 17. The Louisiana Offshore Oil Port, the biggest US oil-import terminal, resumed tanker unloading on Sept. 15 after being shut Sept. 10.

US energy producers still have about 62 percent of oil production idled in the Gulf, the US Minerals Management Service said on its website yesterday. The area accounts for about 26 percent of US oil output.

Supplies of crude oil fell 1.52 million barrels to 290.2 million in the week ended Sept. 19, the department said. Crude oil imports tumbled 16 percent to 7.14 million barrels a day, the lowest since January 2000.

Gasoline stockpiles dropped 5.9 million barrels to 178.7 million barrels, the lowest since 1967. Inventory levels prior to 1990 were reported on a monthly basis.

Supplies of distillate fuel, a category that includes heating oil and diesel, fell 4.18 million barrels to 125.4 million barrels.

Refineries operated at 66.7 percent of capacity last week, the lowest since the department began compiling weekly figures in 1989. The previous low was 69.8 percent of capacity, touched in September 2005, when refineries along the Gulf Coast were shut after hurricanes Katrina and Rita battered the region.

Brent crude oil for November settlement declined 63 cents, or 0.6 percent, to settle at $102.45 a barrel on London's ICE Futures Europe exchange.