Oil prices fell to below $81 a barrel on Thursday after an unexpected increase in gasoline supplies suggested crude demand remains sluggish in America's struggling economy.
Benchmark crude oil for December delivery gave up $1.98 to settle at $80.56 a barrel on the New York Mercantile Exchange. Oil prices are well above the 52-week low of $68.01 set on May 20.
In London, Brent crude lost $1.77 to settle at $81.83 a barrel on the ICE Futures exchange.
The Energy Department's Energy Information Administration said Wednesday that commercial crude inventories rose less than analysts expected, adding 700,000 barrels. But a surprise 1.2 million barrel jump in gasoline supplies dismayed traders.
"Demand is getting worse," Cameron Hanover said. "Lower demand is also telling another element of the story of weakness in the US economy."
For most of the day, crude prices broke out of a correlation with the US dollar, ahead of weekend meetings of finance officials and central bank policymakers from the Group of 20 major economies. Routinely, oil would rise when the US currency fell since that makes dollar-based commodities more expensive for investors with other currencies.
But on Thursday the dollar fell and crude prices also fell, before the dollar ended higher late in New York, with the euro falling to $1.3933 from $1.3961 late Wednesday. The dollar gained to 81.27 Japanese yen from 81.15 yen after sinking to its latest 15-year low of 80.85 yen Wednesday.
In other trading Thursday, natural gas prices slipped to a new low for the year after the government reported that US supplies grew more than expected last week.
The Energy Information Administration said the natural gas held in underground storage expanded by 93 billion cubic feet last week. Analysts expected an increase of between 86 and 90 billion cubic feet, according to Platts, the energy information arm of McGraw-Hill Cos.
The November contract for natural gas tumbled after the report to a new 52-week low of $3.346 per 1,000 cubic feet on the New York Mercantile Exchange. Natural gas settled 17.1 cents lower at $3.368 per 1,000 cubic feet.
Unlike oil, natural gas hasn't seen a big rebound in prices this year, in part because of the hefty storage levels. Petroleum companies also have aggressively expanded drilling operations in America's vast shale formations, producing more natural gas at a time when supplies are already high.
The EIA report said that the US had 3.68 trillion cubic feet of natural gas in underground storage last week. That's 1.3 per cent less than last year's supply, but 8.4 per cent higher than the five-year average.
In other Nymex trading in November contracts, heating oil fell 4.03 cents to settle at $2.2145 a gallon and gasoline dropped 4.16 cents to settle at $2.0410 a gallon.