Gasoline sank to the lowest level since December after the Energy Department reported that demand for the motor fuel sank 4.8 percent last week.
Futures slid as demand fell 4.8 percent to 8.69 million barrels a day. The prior week, consumption surged to the highest level since August. Gasoline losses deepened and heating oil declined to a 17-month low after the Federal Reserve extended its program to replace short-term bonds with longer-term debt without launching a third round of quantitative easing.
“We haven’t been able to string together two weeks of strong demand,” said Sander Cohan, a global transportation fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts. “We’re still waiting for a definitive signal either way.”
Gasoline for July delivery declined 5.13 cents, or 1.9 percent, to $2.5902 a gallon on the New York Mercantile Exchange, the lowest settlement since Dec. 20.
The continuation of Operation Twist “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said today in a statement at the conclusion of a two-day meeting in Washington.
“It really seems as though it’s the end of quantitative easing, that it’s now off the table,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.
Policy makers left unchanged their view that economic conditions will probably warrant keeping interest rates “exceptionally low” at least through late 2014. The FOMC noted that growth in employment and household spending had slowed in recent months and the unemployment rate remains elevated.
“People are looking for any sign of hope that would turn the market back to the upside but the Fed didn’t throw them enough of a life preserver to keep the oil market from sinking,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We’re very well supplied and inventories rose in every major category last week on weaker demand.”
Gasoline demand over the past four weeks was 5 percent below a year earlier. Total product supplied sank 4.2 percent to 18.6 million barrels a day last week, and over the past four weeks was 2.2 percent below a year ago.
Gasoline supplies rose 943,000 barrels last week to 202.7 million, according to department data.
Heating oil for July delivery fell 4.77 cents, or 1.8 percent, to $2.5874 a gallon, the lowest settlement since Jan. 10, 2011.
Inventories of diesel and heating oil rose 1.16 million barrels to 121.1 million, the highest level in seven weeks. Demand fell 4.9 percent to an average 3.51 million barrels a day. Consumption over the past four weeks was 1.6 percent below a year earlier.
Regular gasoline at the pump, averaged nationwide, fell 1 cent to $3.487 a gallon yesterday, according to AAA. It was the lowest price since Feb. 7.