12/27/2012 1:12:00 PM Oil falls with consumer confidence, budget impasse
NEW YORK (AP) — The price of crude fell Thursday following a reported drop in consumer confidence and also growing pessimism that political leaders in Washington can reach a budget deal.
By afternoon, U.S. benchmark crude fell 65 cents to $90.33 barrel in New York.
Senate Majority Leader Harry Reid said the nation appears headed for automatic tax hikes and spending cuts on Jan. 1 because of a lack of progress in budget negotiations between President Barack Obama and Congress. With time running out to avoid a “fiscal cliff,” traders fear that the U.S. could slip into another recession, which would cut demand for energy.
The budget negotiations have begun to drag on consumer confidence, and that too can affect energy prices.
The consumer confidence index fell this month to 65.1, down from 71.5 in November, according to the Conference Board on Thursday. It was the second straight monthly decline and the lowest level recorded since August.
Thursday’s decline in oil followed a big gain from the day before, when reports of higher U.S. home prices and hopes of a budget deal fueled optimism in the market.
Gasoline prices at the pump are up. The national average for gasoline reached $3.261 a gallon, up 1.4 cents from the day before. Gasoline is now 3 cents above a year ago
Investors will be monitoring fresh information on U.S. stockpiles of crude and refined products over the next day. Crude oil supplies are expected to shrink by 2 million barrels for the week ended Dec. 21, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
That drop could be due in large part to refineries using more crude to produce gasoline, diesel and other refined products. Tom Pawlicki, director of market research at EOX Live, told Platts that gasoline supplies should rise as refineries ramp up.
“Demand has been trending lower since mid-November and shouldn’t pressure inventories much,” Pawlicki said.
Analysts surveyed by Platts think the nation’s gasoline inventories rose by 250,000 barrels last week.
In other energy futures trading:
— Wholesale gasoline fell 1 cent to $2.78 a gallon.
— Brent crude, used to price various kinds of foreign oil, was down 87 cents to $110.20 per barrel.
— Heating oil was unchanged at $3.04 a gallon.
— Natural gas lost 2 cents to $3.38 per 1,000 cubic feet.