Oil prices drop below $79 as consumption slumps; more drivers expected for Thanksgiving

Oil settles lower on mixed demand news

NEW YORK — Oil prices increased for the third day in a row as the dollar weakened and AAA reported that more drivers are expected on the highways this Thanksgiving weekend.

Benchmark crude for December delivery added 44 cents Wednesday to settle at $79.58 a barrel on the New York Mercantile Exchange. Most of the trading had already passed to the January contract, which rose 38 cents to settle at $80.10 a barrel.

The weak dollar has helped boost oil prices most of the year. Crude prices, which are priced in U.S. currency, tend to rise as the dollar falls and investors holding strong international currencies get more buying power.

AAA also reported Wednesday that 33.2 million people would get in their cars and travel at least 50 miles over the Thanksgiving weekend, next Wednesday through Sunday. That’s an increase of 2.1 percent from 2008, even though a gallon of gas is 56 cents more expensive than the same time last year.

AAA, which based its report on a telephone survey, said the increase was a sign that consumers are more confident in the economy.

Meanwhile, the Energy Information Administration reported that the country’s stockpile of crude oil fell by 900,000 barrels last week. But the drop was hardly a sign of a recovering economy.

American petroleum consumption has dropped to the lowest level since July 17, and oil companies are importing much less oil as they scale back their refining operations.

“Demand is still very, very weak,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. “It’s keeping us from sharing in the bullish euphoria that you’re seeing in the stock market.”

Some analysts expect weak global economic growth to keep commodities like oil from surging much higher. Global growth will likely average 2.5 percent a year during the next three years, about half the rate between 2002 and 2007, said Stephen Roach, Asia Chairman for Morgan Stanley.

“I don’t see commodities repeating the boom-like surges,” Roach said in Singapore.

At the pump, retail gas prices increased for the first time since Oct. 30, rising less than a penny to $2.632 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 6.8 cents more expensive than last month and 56.4 cents more expensive than the same time last year.

In other Nymex trading, heating oil lost less than a penny to settle at $2.0486 a gallon. Gasoline for December delivery added less than a penny to settle at $2.0114 a gallon. Natural gas for December delivery gave up 27.6 cents to settle at $4.254 per 1,000 cubic feet.

In London, Brent crude for December delivery added 50 cents to settle at $79.47 on the ICE Futures exchange.

Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.