Energy prices on the rise despite huge supply
Dirk LammersEnergy prices rose Wednesday even as the amount of unused crude, gasoline and natural gas being placed into storage rose again.
Natural gas, which each week sets new records for the total amount held in storage, jumped 7 percent.
Energy experts were at a loss to explain why natural gas prices rose. Major industrial customers have slashed power usage during the economic downturn.
Orders for big-ticket factory goods fell unexpectedly in October, according to the Commerce Department, the first decline since August.
Natural gas levels are usually being drawn down at this time of the year as people turn on the heat in their homes.
It's been an extraordinarily mild winter to date almost everywhere, however, and that is helping to push gas storage levels to new heights.
"The last time we saw an injection this late in the year occurred back in 2001," said analyst Stephen Schork.
Also, another 1 million barrels of crude and an equal amount of gasoline went into storage last week, the government reported. Futures contracts for both rose more than 1 percent Wednesday.
Benchmark crude for January delivery fell 90 cents to $76.92 on the New York Mercantile Exchange.
Retail gasoline prices that have fallen for a week will likely stabilize and could rise a bit if refiners keep cutting production.
The average price for a gallon fell less than a penny to $2.636 overnight, according to auto club AAA, Wright Express and Oil Price Information Service. That's still a few cents cheaper than a month ago.
Even though there is little actual demand for oil and gasoline, prices are being dragged higher because of a weak dollar.
If an investor holds euros or other currencies that strengthen against the dollar, he can get more oil for less because it's bought and sold largely in dollars.
Crude prices have traded above $75 for more than a month even as refiners shut down with demand for fuel so low.
Demand for distillate fuels dropped by nearly 10 percent over the past four weeks compared with the same period last year, according to a weekly government report released Wednesday.
Yet the dollar keeps investors coming back.
On Wednesday, the dollar tumbled to 15-month lows, meaning someone holding a euro could trade it in for more than $1.50.
"Loose monetary policy and a weaker dollar should put upward pressure on crude oil prices next year," analysts with Bank of America Merrill Lynch said in a report.
In other Nymex trading, gasoline for December delivery rose 2.33 cents to $1.9623 a gallon. Heating oil gained 2.3 cents to $1.9725 a gallon. Natural gas for December delivery jumped 31 cents to $5.08 per 1,000 cubic feet.
In London, Brent crude for January delivery rose 35 cents to $76.81 on the ICE Futures exchange.
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Associated Press Writers Alex Kennedy in Singapore and Barry Hatton in Lisbon, Portugal, contributed to this report.