Gas prices in the US fell less than a penny to $3.539 per gallon overnight Tuesday, dropping 16 cents below gas prices a year ago.
M. Spencer Green/AP/File
Oil prices fell Wednesday as negative U.S. economic news trumped a report showing a decline in the nation's oil and gasoline supplies.
Benchmark crude dropped 49 cents in midday trading Wednesday to $82.83. Brent crude, which is used to price international oil and to make gasoline in much of the United States slipped 25 cents to $96.72.
The Commerce Department said Wednesday that retail spending slipped 0.2 percent in May, following an identical decline in April. That's a sign consumers are pulling back, which could in turn lead to lower consumption of gasoline and crude oil.
Meanwhile, the Energy Department said crude inventories fell by 200,000 barrels last week, though they remain relatively high for this time of year. Gasoline supplies fell 1.7 million barrels, however, leaving stocks slightly below average.
Analysts had expected an increase in gas supplies. The decline was surprising because U.S. gasoline demand has been weak. It was a large drop in spending at the pump that dragged down overall retail sales in May, the Commerce Department said.
The supply report briefly pushed oil higher before it retreated back to negative territory.
U.S. retail gasoline prices fell less than a penny to $3.539 per gallon overnight. That's 16 cents per gallon less than last year and 40 cents less than this year's high, set on April 6. Even though lower gasoline sales dragged down retail spending last month, economists think declining pump prices may help boost retail spending in months to come by giving drivers more money to spend on other things.
Oil markets are skittish ahead of several upcoming events that could influence global supply and demand. Thursday the Organization of Petroleum Exporting Countries will meet in Vienna. The group could decide to restrict production in an effort to reverse a decline in the price of crude. Oil has fallen 24 percent since late February.
More U.S. economic data will be released this week, including initial jobless claims for the first week in June and industrial production in May. An election in Greece that could lead the country to abandon the euro has traders worried that the European financial crisis could worsen. And early next week leaders from six global powers will try to convince Iran to abandon its nuclear ambitions when the two sides meet in Moscow.
"We have such a basket of risk, we're up, we're down, it's a trader's market," says Rich Ilczyszyn, founder of iiTrader.com.
In other trading, heating oil fell less than one cent to $2.615 per gallon, wholesale gasoline rose 1 cent to $2.66 per gallon and natural gas fell 1 cent to $2.22 per 1,000 cubic feet.