By The Associated Press, Associated Press
NEW YORK (AP) — Oil fell Friday to its lowest level of the year on worrisome economic developments in the world's two largest oil-consuming nations.
The price of crude fell 1.5 percent and is down 6 percent in two weeks. That should allow drivers to catch their breath after a record rise in gas prices over the first two months of the year.
The average price for a gallon of gas rose 49 cents from Jan. 1 through the end of February, AAA said, eclipsing last year's increase of 46 cents in the same period.
Oil dropped close to $90 a barrel Friday as the prospect of U.S. government spending cuts raised concerns about oil demand in the world's leading economy. In addition China's manufacturing grew at its weakest rate in five months in February.
Benchmark crude for April delivery fell $1.37 to close at $90.68 a barrel in New York. Oil last closed below $91 in New York on Dec. 28.
While there have been signs of an improving U.S. economy in recent weeks, attention Friday was focused on the increasing likelihood that about $85 billion in spending cuts could start taking effect later in the day as part of an earlier budget agreement between the White House and Congress.
The International Monetary Fund has predicted that the spending cuts could reduce U.S. growth by some 0.5 percentage point in 2013.
In China two surveys showed that manufacturing growth slowed last month, as demand faltered and factories shut down for the Lunar New Year holiday.
Brent crude, used to price many kinds of oil imported by U.S. refineries, fell 98 cents to finish at $110.40 a barrel on the ICE Futures exchange In London.
The declines should mean at least temporary relief for drivers, who've paid higher prices with each trip to the gas station this year. The national average dropped a penny overnight to $3.77 a gallon. That's the biggest one-day decline since mid-December. Gas costs about 3 cents a gallon more than it did last year at this time.
By Sunday or Monday the average retail price will be below last year's price for the first time since February, predicts Tom Kloza, chief oil analyst at the Oil Price Information Service.
Kloza thinks that gasoline prices will dip in the coming weeks. But gas could rise later in the month and surpass its recent high as refiners continue switching to summer blends of gasoline. "It could be a false peak," he said of the high of $3.79 hit on Wednesday.
He expects the highest price of the year to fall within the range of $3.80 to $4.10 per gallon. Last year gasoline peaked at $3.94 on April 6. The national average hasn't reached $4 since July 2008.
The higher gas prices haven't put a noticeable dent in car sales. Most major automakers on Friday reported increased sales for February.
Kloza said the decline in the national average gas price will be led by California. Prices there began to climb earlier than most places this year, and rose the highest. California has the second-highest state average at $4.23 a gallon, behind only Hawaii.
Wholesale gasoline prices in California have dropped off sharply this week, and that will translate into lower prices at the pump over the next several days, Kloza said.
In other energy futures trading on the Nymex:
- Wholesale gasoline rose 2 cents to end at $3.13 a gallon.
- Heating oil lost 3 cents to finish at $2.93 a gallon.
- Natural gas fell 3 cents to end at $3.46 per 1,000 cubic feet.
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