Oil prices fall on rising supply
Oil prices fell Wednesday after American crude inventories grew more than expected last week, and on continuing speculation major consuming countries will dip into their strategic reserves in order to head off rising gasoline prices.
Benchmark U.S. crude for May delivery fell $1.92 to $105.41 per barrel in New York while Brent crude — the reference price for prices paid at the major Texas refining hub on the Gulf of Mexico — lost $1.38 to finish at $124.16 per barrel in London.
The drop in the price of Canada's biggest commodity export helped drag the Toronto stock market lower.
The S&P/TSX composite index, which was also weighed down after the latest reading on American durable goods orders missed expectations, closed down 98.18 points at 12,413.86.
The Canadian dollar was off 0.30 of a cent to 100.21 cents US.
Orders for durable goods — products expected to last at least three years, such as appliances, cars, machinery and airplanes —grew by 2.2 per cent, against the three per cent rise expected by economists.
U.S. crude supplies grew by 7.1 million barrels, or 2.1 per cent, to 353.4 million barrels, which is 0.7 per cent below year-ago levels, the Energy Department's Energy Information Administration said in its weekly report Wednesday.
Analysts expected a rise of 2.75 million barrels for the week ended March 23, according to Platts, the energy information arm of McGraw-Hill Cos.
Crude was $75 in October
On Wednesday, France's government said it is considering a release of emergency stockpiles as part of a U.S.-led effort to cool off the rise in oil prices. Government spokeswoman Valerie Pecresse said France is waiting for recommendations from the International Energy Agency before tapping its reserves.
In Germany, a spokesman for Chancellor Angela Merkel said the government had received no official request to release its reserves.
"If there were concrete proposals or requests, we would examine them," Steffen Seibert told reporters.
If consumers get a break on what they have to pay for energy, that could provide a bump for the U.S. economy.
Crude has jumped from $75 in October as signs of an improving U.S. economy bolstered investor confidence and as a glut of American oil was prevented from reaching refineries in Texas because of inadequate pipeline capacity.
Traders have also pushed futures prices higher on worries Western sanctions against Iran — imposed because of fears it is developing nuclear weapons — will prompt Iran to follow through on threats to block the Strait of Hormuz, a major chokepoint for oil being shipped out of the Persian Gulf.
Canadian gasoline rises 6%
However, demand hasn't picked up yet and economists expect consumption could remain tepid with U.S. gasoline prices nearing $4.00 a gallon.
Price-tracking website GasBuddy.com said Wednesday the average Canadian price for regular was $1.30 a litre, up six per cent from a year ago.
Some analysts forecast weaker economic growth and demand from China, the world's second largest economy, will pull oil prices lower. Capital Economics expects Brent crude to fall to below $100 by the end of the year.
"Perhaps the biggest concerns are the signs of weakness in China," Capital Economics said in a report.
"The years of sustained double-digit growth in China's economy are now ancient history and the risks over the next several years, both to growth and commodity demand, lie overwhelmingly on the downside."
With files from The Associated Press