Gas, oil prices fall as flood fear ebbs

An unexpected increase in U.S. gasoline inventories and an easing of fears that Mississippi River flooding would interrupt refinery production sent gasoline and oil futures plummeting in New York trading Wednesday, leading experts to predict -- again -- that consumers should be seeing lower prices at the pump in coming weeks.

"I think the worst at the pumps should be behind us now," said trader John Kilduff, a partner at Again Capital Llc, an energy hedge fund based in Suffern. The Associated Press Wednesday quoted unnamed analysts predicting pump prices will drop by 30 to 40 cents a gallon by the end of this month.

Prices locally have been flat since a small decline over the weekend. Wednesday the average for regular on Long Island rose by four-tenths of a cent, to $4.275, the AAA said.

Prices had been rising almost every day since the recent low of $2.829 a gallon on Sept. 7.

But the futures markets have been volatile. On Monday, traders decided that the possibility of interruptions in barge traffic and refinery operations in the Louisiana area warranted higher futures prices for gasoline and oil. Wednesday, said Kilduff, they decided that those concerns were overblown and that only two refineries faced a remote danger of interruption to their operations. "The river didn't crest as high as they thought it would in Memphis," he said.

Then the U.S. Department of Energy surprised most experts by saying gasoline inventories rose last week rather than continue to decline -- by 1.28 million barrels to 205.8 million, which Bloomberg News said was the first gain in 12 weeks. Kilduff attributed the decline to reduced exports of U.S. gasoline and to reduced demand by U.S. consumers, who have cut back on driving in the face of pump prices that are approaching records set in the summer of 2008.

MasterCard Advisors' SpendingPulse report issued Tuesday said gasoline purchases in the week that ended Friday by all methods of payment were 2.4 percent lower than a year earlier, at 63.8 million barrels.

Crude oil stockpiles jumped 3.78 million barrels to 370.3 million last week, said the energy department. U.S. crude futures fell $5.67 to settle at $98.21 a barrel Wednesday on the New York Mercantile Exchange. Gasoline futures dropped 25.69 cents, to $3.1228 a gallon in what Bloomberg News said was the biggest single-session fall since Feb. 17, 2009.

Last week U.S. crude oil futures fell in New York trading from $114 on Monday to $97.18 a barrel on Friday.

With Bloomberg and AP