Energy futures fell sharply Wednesday after the government reported a surprising jump in crude oil and distillate fuel inventories last week, according to ap. In its weekly inventory report, the Energy Department's Energy Information Administration said crude oil inventories rose by 3.8 million barrels, more than double the increase that analysts surveyed by energy research firm Platts had expected. Meanwhile, inventories of distillates, which include heating oil and diesel fuel, rose by 1.1 million barrels, more than seven times the expected increase. As a result, light, sweet crude for June delivery fell $1.58 to $114.05 a barrel on the New York Mercantile Exchange. Investors shrugged off a 1.5 million barrel decline in gasoline inventories, which was nearly double the expected decrease. In part, that's because despite the decline, supplies of gasoline remain high for this time of year. Also, demand for gasoline fell slightly over the last four weeks, on average, compared with the same period last year, EIA data show. «The demand just isn't there, and there's plenty of supply,» said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. Analysts say record gas prices are depressing demand for gasoline. At the pump, the national average price of a gallon of regular gas rose a cent overnight to a record $3.617 (95 cents a liter), according to a survey of stations by AAA and the Oil Price Information Service. Diesel fuel rose 0.6 cent to a new record of $4.25 a gallon ($1.12 a liter). At some point, falling demand will pull prices down, analysts say, though few are willing to predict when that will happen. Energy traders are also waiting for a decision from the Federal Reserve, which is expected to cut its benchmark interest rate by a quarter percentage point Wednesday afternoon. A quarter point cut is largely priced into the market, analysts say, but some investors are betting on a larger cut while others think the Fed will take no action. Interest rate cuts tend to weaken the dollar, and investors buy commodities such as oil as a hedge against inflation when the greenback falls. A weaker dollar also makes oil cheaper for overseas buyers. While the energy market is interested in what the Fed does Wednesday about rates, investors are also anxious to see the central bank's accompanying statement that will give clues to its plans going forward. It is widely expected that the Fed will pause after a cut on Wednesday. Stable rates would also tend to support the dollar.
