Economic doubts drag down oil price

Noel Garcia delivers oil to a Brooklyn home. Crude oil yesterday fell to its lowest price in two months. (Andrew Harrer/Bloomberg News)

COLUMBUS, Ohio - Oil prices slid to a new low for the year yesterday because of growing doubts that the $789 billion stimulus package will reinvigorate the economy and demand for energy.

Crude supplies in the United States reached an 82-week high last week, according to the Department of Energy, showing just how far demand has fallen.

Gas prices, meanwhile, reached a new high for 2009 and appeared headed back to $2 a gallon as refiners cut back on production.

Light, sweet crude for March delivery tumbled $1.96, more than 5 percent, to settle at $33.98 a barrel on the New York Mercantile Exchange. Since Monday, the price for a barrel of oil has fallen nearly 20 percent. Crude last settled below $34 two months ago.

Dispiriting economic news continues to depress energy prices because traders see consumers and businesses cutting back spending even further in coming months.

Jim Ritterbusch, president of Ritterbusch and Associates, said it is unclear how much oil will benefit from the stimulus package and the Treasury Department's plan unveiled earlier this week to spend more than $1 trillion to help remove banks' soured assets from their books and unclog the credit markets.

He said he is looking for oil prices to retest multiyear lows of $32.70 reached in January.

While oil prices have been sliding, gas prices have been on the move. Prices at the pump rose 1.2 cents overnight to $1.95 nationwide, the highest level since Thanksgiving, according to auto club AAA and the Oil Price Information Service.

Prices are 34 cents higher than they were when they bottomed on Dec. 31, but still $1.02 below year-ago levels.