Oil slides below $77 as supplies and demand grow; Fed Reserve chairman sees fragile economy

Oil falls below $77 as supplies grow

Oil prices retreated Wednesday after the government said crude supplies grew despite more demand for most types of fuel. Comments from Federal Reserve Chairman Ben Bernanke about the fragile economy also pushed prices down.

Drivers found gasoline pump prices lost a fraction of a cent at a national average of $2.718 for a gallon of unleaded regular. That’s half a cent higher than a week ago and 26 cents above year-ago levels.

Benchmark crude for September delivery fell $1.02 to settle at $76.56 a barrel on the New York Mercantile Exchange.

Crude oil inventories increased by about 400,000 barrels to 353 million barrels last week, the Energy Department’s Energy Information Administration said. That surprised analysts, who expected supplies to fall by 1.6 million barrels.

Gasoline inventories rose by 1.1 million barrels to 222.2 million barrels and stockpiles of distillate fuel, which includes diesel and heating oil, rose by 3.9 million barrels to 166.6 million barrels.

In the four weeks ended July 16, wholesale gasoline demand increased 2 percent to 9.4 million barrels a day.

“The bottom line is that demand has been improving recently, but not enough to eat into surpluses that remain especially large against two years ago,” energy consulting firm Cameron Hanover said.

Testifying before the Senate Banking Committee, Fed Chairman Bernanke said the central bank is ready to take new steps to keep the recovery alive if the economy worsens. He repeated a promise to keep interest rates low for “an extended period” to bolster the economy.

The Dow Jones Industrial Average lost over 109 points in Wednesday trading. The broader Standard & Poor’s 500 index and the Nasdaq composite index were lower as well.

Oil traders have been closely watching corporate earnings and the stock markets for signs of overall investor sentiment.

In other Nymex trading heating oil fell 3.55 cents to settle at $1.9892 a gallon, gasoline lost 1.08 cents to settle at $2.0678 a gallon and natural gas dropped 7.7 cents to settle at $4.513 per 1,000 cubic feet.

Brent crude fell 85 cents to settle at $75.37 per barrel on the ICE futures exchange.

Associated Press writers Barry Hatton and Alex Kennedy in Singapore contributed to this report.