Oil loses ground as Fed lowers economic growth outlook; pump prices steady

Oil settles lower after Fed revises outlook

Oil prices drifted lower Wednesday after the Federal Reserve lowered its forecast for U.S. economic growth this year.

Gas pump prices halted a post-July 4th slide and remained unchanged, according to AAA, Wright Express and Oil Price Information Service. The national average for a gallon of unleaded regular is $2.713, down 0.8 cent from a week ago and almost 20 cents higher than a year ago.

The Fed said U.S. gross domestic product will grow by 3 to 3.5 percent this year. That compares with an April forecast of 3.2 to 3.7 percent growth. The central bank also said unemployment will stay above 9 percent.

The news wasn’t any better earlier in the day from the Commerce Department, which said shoppers cut back on spending for the second straight month, raising concerns about the potential for stronger oil and gas demand.

“Inventories are rebuilt to a large extent. The stimulus is winding down and we’re back to relying on the consumer to push things along. He can’t spend because he can’t borrow any money to do it,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

Benchmark oil fell 11 cents to settle at $77.04 on the New York Mercantile Exchange after rising as high as $78.15 earlier in the session.

Crude prices got a morning boost from the weekly inventories report from the Energy Department’s Energy Information Administration. It said oil supplies shrank by 5.1 million barrels to 353.1 million barrels. Analysts expected a drop of only 2.6 million barrels for the week ended July 9, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Platts senior oil analyst Linda Rafield noted a steep drop in demand last week for all petroleum products except jet fuel. She also said that while overall crude stocks fell, inventories at Cushing, Okla. — the Nymex crude oil futures contract delivery point — edged up 314,000 barrels to 36.12 million barrels after three straight weeks of declines in that region.

Gasoline inventories gained 1.6 million barrels at 221 million barrels, which is 3 percent more than a year ago. Wholesale demand for gasoline over the four weeks ended July 9 averaged 9.3 million barrels a day, about 1.8 percent above year-ago levels.

U.S. refineries ran at 90.5 percent of total capacity on average.

“At the end of the day, one thing that we’re seeing is a little larger than normal crude draw, but they’re simply turning it into products faster,” Ritterbusch said.

In other Nymex trading, heating oil lost 1.13 cents to settle at $2.0361 a gallon, gasoline gave up 1.56 cents to settle at $2.0665 a gallon and natural gas fell by 4.8 cents to settle at $4.306 per 1,000 cubic feet.

Brent crude rose 12 cents to settle at $76.77 a barrel on the ICE futures exchange.