Oil Prices Fall on Supply Report

The price of oil drops for the second straight day, after a new government report shows inventories are not as tight as expected. After nearing $100, prices tumble more than $7 a barrel to less than $91 per barrel. The report also says that demand for gas grew only slightly in the last four weeks.

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Crude oil prices have not been helping the economy recently. They've been creeping up around $100 per barrel.

Now they are backing down, but that has not brought any relief at the pump, as NPR's Scott Horsley reports.

SCOTT HORSLEY: After nearing the century mark last week, oil prices have tumbled more than $7 a barrel in just two days. Late yesterday, a barrel of oil was selling for less than $91. Phil Flynn of Alaron Trading in Chicago says that's the second biggest two-day drop on record.

Mr. PHIL FLYNN (Analyst): This has been the correction. I think we can say those $100 dreams are just dreams right now. We're probably not going to see a hundred dollar a barrel this year.

HORSLEY: The drop in oil prices came as the Energy Department reported bigger than expected stockpiles of both crude oil and gasoline. The department also says demand for gas grew only slightly in the last four weeks, suggesting drivers may have let up a little on the gas when pump prices topped $3 a gallon.

Mr. FLYNN: We're starting to see demand for oil drop off because of the sharp increase in price that we've seen over the recent weeks. And I think that's impacted the prices as well.

HORSLEY: Falling crude oil prices have not filtered down to the retail level yet. Triple A says the average price at the gas pump actually rose slightly yesterday to a national average of about $3.10 a gallon. Still, the prospect of falling oil prices could ease inflation worries and make it easier for the Federal Reserve to lower interest rates. That hope helped to buoy the stock market yesterday, with the Dow Jones Industrial Average gaining more than 300 points.

Scott Horsley, NPR News.

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