NEW YORK (AFP) — Oil prices tumbled Wednesday as supply concerns eased after a bigger-than-expected increase in gasoline reserves was reported in the United States.
The threat to supply from Hurricane Dolly in the Gulf of Mexico diminished as the storm veered away from offshore oil installations.
New York's main contract, light sweet crude for September delivery, dropped a hefty 3.98 dollars to close at 124.44 dollars a barrel.
In London, Brent North Sea crude for September delivery shed 4.26 dollars to settle at 125.29.
A rising dollar also helped push down crude prices.
Phil Flynn, analyst at Alaron Trading, said the market was influenced by recent comments from Philadelphia Federal Reserve president Charles Plosser, "who said US monetary policy is between a rock and a hard place and that an interest rate increase could come faster than expected," Flynn said.
"Those comments hit the dollar and helped drive commodities lower," he added.
Prices have tumbled by more than 23 dollars since striking record highs above 147 dollars on July 11. However, they remain at elevated levels after smashing through 100 dollars for the first time at the start of the year.
The US Energy Information Administration said Wednesday that crude reserves fell 1.6 million barrels in the week ending July 18. Market expectations had been for a smaller decline of 600,000 barrels.
But the EIA's weekly snapshot also showed that gasoline stockpiles rallied by 2.9 million barrels, far outstripping analysts' consensus forecasts for a gain of 200,000 barrels.
Gasoline consumption was 2.4 percent lower from a year ago as drivers faced sky-high gasoline prices of 4.11 dollars a gallon (3.78 liters) in the peak of the traditional summer holiday driving season.
Prices at the pump eased to 4.06 dollars Monday, up 37 percent from a year ago, the latest EIA data showed.
Traders tracked the progress of Hurricane Dolly, which slammed onto South Padre Island, Texas, near the Mexico border, Wednesday, according to the US National Hurricane Center.
The first hurricane of the season in the gulf prompted some oil companies to evacuate personnel from their offshore rigs, but by early Wednesday the storm looked set to bypass the major oil producing areas in the Gulf.
The National Hurricane Center has forecast an especially active 2008 weather season, saying there could be up to nine hurricanes and 12 tropical storms in the Atlantic region. The Atlantic hurricane season runs from June 1 through the end of November.
Tropical storms in 2005, especially Hurricane Katrina, caused massive disruption to energy production in the Gulf of Mexico and pushed up oil prices to then-record levels.
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