Oil was little changed Wednesday, but gasoline futures plunged after a report showed that demand for fuel in the U.S. remains relatively weak.
In afternoon trading benchmark oil for May delivery was up 31 cents at $94.51 a barrel in New York. Wholesale gasoline prices dropped 7 cents, or 2.3 percent, to $2.88 a gallon. That could signal more good news for drivers, who've seen the average price at the pump drop 21 cents in the past six weeks.
Crude oil supplies grew by 300,000 barrels, or 0.1 percent, in the week ended April 5, according to the Energy Information Administration, the Energy Department's statistical arm. At 388.9 million barrels, the U.S. oil supply is the highest since July 1990. Analysts had expected a bigger increase of 1.4 million barrels, according to Platts, the energy information arm of McGraw-Hill (NYSE:SPGI).
But the figures on other fuels illustrate how U.S. demand remains subdued. Gasoline supplies expanded by 1.7 million barrels, while analysts had expected supplies to shrink by 1.8 million barrels. Demand for gasoline fell 2.4 percent in the four weeks ended April 5, the EIA said.
On Tuesday the EIA predicted that gasoline consumption would drop by 20,000 barrels a day from April through September, compared with last year, as any increase in travel is offset by greater fuel efficiency in the nation's auto fleet. The fuel economy of new vehicles sold in the U.S. improved to 24.6 mpg in March from 24 mpg a year ago, according to data from the University of Michigan. And although gas this April is the cheapest it's been in three years, it's high enough at an average of $3.57 a gallon that some drivers still have to pay $50 or more for a full tank of gas.
Of course demand could rise if the current price trend continues. Gas cost an average $3.78 a gallon at the end of February. Since then it's dropped 6 percent, and some analysts think increased refinery usage -- now at about 87 percent -- and growing fuel supplies could herald further decreases.
Phil Flynn, senior market analyst at PRICE Futures Group, said in a daily newsletter that "the building of supply of the summertime blends of gasoline is ahead of schedule for the upcoming summer driving season. That should lead to additional price drops in the gasoline market."
Other analysts think gasoline could rise again, particularly on the East and West Coasts, before summer driving season kicks in. But they don't expect the price to top last year's peak of $3.94, set on April 6, 2012.
Supplies of distillates, which include diesel and heating oil, decreased by 200,000 barrels to 112.8 million barrels. Analysts expected a much bigger decline of 1.8 million barrels. Still, heating oil futures dropped just 1 cent to $2.95 a gallon, likely getting some support from forecasts that suggest the middle of the country could be hit by a cold spell next week.
Those weather forecasts drove a big gain in natural gas prices. Natural gas was up 12 cents, or 3 percent, to $4.14 per 1,000 cubic feet. Commodity Weather Group forecasters said in a report that there was potential for "significant cooling" that could affect the Midwest and Texas next week. Temperatures could fall as much as 15 degrees below normal in the Plains states over the next six to 10 days.
Natural gas has risen 24 percent this year, boosted by a cold end to winter.
Brent crude, which sets the price of oil used by many U.S. refineries to make gasoline, was down 47 cents to $105.68 per barrel on the ICE Futures exchange in London.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.