Winter blast trumped by growing crude supplies as prices slide

Surprise jump in gas supply sends prices down

One of the worst winter blasts in years could not obscure the enormous amount of crude and gasoline the U.S. has in storage and most energy prices began to give way Wednesday.

The first glimpse this year of supply and demand figures from the government revealed that the oil held in U.S. storage facilities is growing, stunning many energy experts who expected supplies to fall.

The amount of gasoline put into storage was triple what most analysts had forecast. One reason could be that it’s been so cold, particularly in the Northeast, that fewer people are driving.

Last week, 3.7 million barrels of gasoline were put into storage.

Expectations that frigid temperatures and more optimistic consumers would add up to a strong rebound in demand faded.

Still, crude prices earlier Wednesday rose above $82 per barrel, a level that has not been seen since 2008. Oil has surged about 15 percent since mid-December.

After the weekly report from the Energy Information Administration surprised traders, benchmark crude on the New York Mercantile Exchange dropped 26 cents to $81.51.

There is still no clear consensus on energy trends for 2010 and Peter Beutel of Cameron Hanover points out an enormous amount of speculative money coming into the market.

That could push crude prices higher, and in their wake, gasoline prices.

Average retail gasoline prices are expected to hit $2.70 per gallon by the weekend, something that never happened last year.

Prices at the pump climbed 1.8 cents to $2.685 per gallon overnight, according to auto club AAA, Wright Express and Oil Price Information Service. That’s 6.2 cents higher than a week ago.

No one is counting out the nasty winter blast yet. Prices are still close to last year’s highs for oil, gasoline, heating oil and natural gas.

A new winter storm developing in the Northern Plains Wednesday could bring more snow and even colder temperatures from the Dakota to the upper Midwest where homeowners count on natural gas to stay warm.

Natural gas futures on Wednesday jumped almost 5 percent.

It’s not just the U.S. that is getting hit by the cold, either. Another energy behemoth, China, is dealing with its own winter storms.

A big snowstorm hit Beijing Wednesday and freezing temperatures were expected to last through the week.

In other Nymex trading in February contracts, heating oil fell 2.12 cents to $2.1729 a gallon and gasoline slid 1.81 cents to $2.1069 a gallon. Natural gas futures rose 27.8 cents to $5.915.

In London, Brent crude for February delivery fell 45 cents to $80.14 a barrel on the ICE Futures exchange.