Oil rally sputters; prices below $67 per barrel
COLUMBUS, Ohio -- A two-week rally in oil markets sputtered Tuesday and crude prices fell along with the stock market.
Prices first dipped in electronic trading before the market opened and then dropped sharply when new data suggested consumers are less confident than ever about their jobs and the economy as a whole.
Economic anxiety has kept people closer to home this year and the most energy-intense industries have cut back on production.
Benchmark crude for September delivery fell more than 2 percent, or $1.54, to $66.84 a barrel in trading on the New York Mercantile Exchange.
What appears to be an end to an extended rally comes one day ahead of a government report detailing how much crude is in storage.
If the latest economic data can be taken as a barometer, it suggests that the appetite for energy has not rebounded as quickly as some had hoped.
Even before the sell-off Tuesday, most energy experts expected crude in storage to rise because demand remains weak.
A barrel of oil was about $9 cheaper just two weeks ago, before better-than-expected corporate earnings suggested to some that the economy is on the mend. The Dow Jones industrial average has jumped 11 percent in about the same time.
But while many energy experts and oil traders say that there is a clear correlation between energy and equities markets, they have questioned the whether oil prices should be this high.
"Theoretically, the oil market shouldn't be following the equity markets higher, but it has," said Jim Ritterbusch of Ritterbusch and Associates.
Executives at major energy companies continue to say that a rebound in demand is a long way off.
On Tuesday, the first major international oil company reported results from the second quarter.
BP PLC, Europe's second largest oil company, said profits fell 53 percent compared with a year earlier, when crude spiked to record heights.
CEO Tony Hayward said he expected any recovery to be "long and drawn out."
Valero Energy Corp., the nation's largest independent refiner, reported a loss $254 million Tuesday, just a year removed from profits of $734 million. And Valero said it could continue to lose money for the rest of the year if a weak economy persists.
The second quarter us usually very strong for companies like Valero, which refines oil into jet fuel and gasoline, because it is usually the three months when people travel most.
But there is much less being shipped in 18 wheelers and Americans are driving far less than they did in past years, even though gasoline is a comparative bargain.
Prices at the pump edged 0.5 cents higher overnight to $2.505 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 4.7 cents higher than they were a week ago but still $1.453 below year-ago prices.
It's the cheapest price for gasoline at this time of year in about four years.
In other Nymex trading, gasoline for August delivery fell 3 cents to $1.90 a gallon and heating oil lost 3 cents to $1.7666. Natural gas for August delivery fell 14 cents to $3.46 per 1,000 cubic feet.
In London, Brent crude prices fell $1.33 to $69.48 a barrel on the ICE Futures exchange.