In its weekly inventory report, the department’s Energy Information Administration said demand for gasoline fell by 1.4 per cent over the last four weeks. Meanwhile, gasoline inventories rose by 2.9 million barrels last week, more than three times the increase analysts polled by energy research firm Platts had expected.
Inventories of distillates, which include diesel and heating oil, rose by 2.3 million barrels. Investors shrugged off an unexpected decrease in crude oil inventories.
Light, sweet crude for July delivery fell $1.79 to $122.52 barrel in morning trading on the New York Mercantile Exchange.
Concerns about demand have helped pull oil down from its May 22 high of $135.09. Those concerns were exacerbated on Wednesday by the EIA report and by moves by India and Malaysia to cut fuel subsidies, effectively raising prices. Many investors believe subsidy cuts will choke off demand for fuel in the developing world.
The decision by some countries in Asia to lower subsidies on oil products also was seen as having a bearish effect. On Wednesday, India and Malaysia joined countries that are raising prices for fuels from gasoline to cooking gas.
India announced increases which, for example, would boost gasoline prices in New Delhi by 11 per cent. Malaysia said it would hike gasoline prices by 40 per cent and electricity for commercial and industrial users by 26 per cent.
Indonesia and Taiwan, among others, took similar steps in recent days.
Many analysts have long questioned whether high oil prices could be sustained; many blame speculative investing fueled by the falling dollar for a near doubling of crude prices over the past year.