Oil futures tumbled 12 percent, the most in more than seven years, after a U.S. government report showed bigger-than-expected increases in supplies of crude oil, gasoline and distillate fuel as consumption dropped. Inventories of crude oil rose 6.68 million barrels to 325.4 million barrels last week, the highest since May, the Energy Department said today in a weekly report. Supplies were forecast to increase by 800,000 barrels, according to the median of forecasts by 14 analysts in a Bloomberg News survey.
"We have the making of a huge glut here," said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. "Supplies are more than adequate and should continue to rise because demand is so poor."
Crude oil for February delivery fell $5.95 to $42.63 a barrel at 2:46 p.m. on the New York Mercantile Exchange, the lowest settlement since Dec. 30. Today's decline was the biggest since Sept. 24, 2001. Futures on the exchange are down 55 percent from a year ago.
Inventories at Cushing, Oklahoma, where oil that's traded on Nymex is stored, climbed 14 percent to 32.2 million barrels last week, the highest since at least April 2004, when the department began keeping track of supplies there.
"We're pushing up toward capacity limits," said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. "There's still a bit of space, but not much."
| And the oil companies thus will curtail exploration, so that in 2013 when President Palin is inaugurated gas prices will surge and she'll be blamed ... |