The Associated Press
NEW YORK (AP) - Oil prices sank nearly 6 percent Wednesday, the largest drop in more than three months, with more signs emerging that consumers are cutting back on energy costs.
Benchmark crude for September delivery fell $3.88 to settle at $63.35 a barrel on the New York Mercantile Exchange. In London, Brent prices lost $3.14 to $66.74 a barrel on the ICE Futures exchange.
The summer driving season has been a bust for industries that rely heavily on summer travel because Americans are staying very close to home. Industries have cut back as well, shuttering factories that consume a lot of energy and laying off workers.
Consumer confidence has been rattled, even though there are some indications of improvement in areas like housing.
Oil prices haven't seen a one-day drop like this since April 20, when crude fell nearly 9 percent in one day.
Crude prices staged a two-week rally earlier this month, but that was tied to a parallel rise in the stock market and general enthusiasm that the economy was healing.
The continued glut in oil, combined with weak demand for heating oil, jet fuel and other petroleum products, shows how much the strain there is on the economy, said Andrew Lebow, senior vice president and broker at MF Global.
On Wednesday the government reported that orders to U.S. factories for big-ticket durable goods plunged in June by 2.5 percent, the largest amount in five months. The figure was much larger than the 0.6 percent decline economists had expected and was the biggest setback since a 7.8 percent fall in January.
Early in the recession, consumers began cutting back on energy costs, and that has continued throughout the year.
The Energy Information Administration reported Wednesday that crude supplies in the U.S. grew by 5.1 million barrels. That's about 18 percent above last year's levels, showing how much unwanted crude is in storage.
The Federal Highway Administration recently reported that demand has edged slightly higher for gasoline, given that gas is so much cheaper than last year. But the shift in behavior by motorists this summer is clear.
Gasoline supplies have risen by 11.4 million barrels over the past six weeks.
Still, refiners are cutting back to match falling demand.
The government is set to report natural gas inventories on Thursday. Analysts expect U.S. stockpiles to grow even more.
At the pump, gas prices have climbed for a week, adding less than a penny overnight to a new national average of $2.511 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Regular unleaded gas peaked in June, and a gallon is 12.8 cents cheaper than the same time last month. It's also $1.43 cheaper than the same time last year.
The unexpected surge in oil supplies, combined with falling equities markets and a rising dollar, pushed energy prices lower across the board. Gas futures, heating oil and natural gas contracts all fell at least 3 percent.
In other Nymex trading, gasoline for August delivery fell 6.06 cents to $1.85 a gallon and heating oil lost 9.3 cents to $1.6717 a gallon. Natural gas for August delivery dropped 15.5 cents to $3.38 per 1,000 cubic feet.
Associated Press writers George Jahn in Vienna and Alex Kennedy in Singapore contributed to this report.