Crude oil futures prices fell Thursday to a nine-week low.  The sell off was due to a report by the Department of Energy indicating a higher than expected inventory level and weak demand. Crude oil fell 4.5%, or $3.62 per barrel to close at $65.89 per barrel. That put prices at the lowest level since July 29, and Thursday's drop was the biggest since that date. Thursday's drop followed a nearly 4% decline Wednesday in response to a sharp rise in stockpiles and slowing consumption. Crude prices have dropped $6.41 per barrel in the two days.
     Refiners, pressured by the weakest margins this year, continue to keep production at a minimum.  Since refineries have kept production low, it has done nothing to reduce high inventory levels of crude.  Low demand and high inventories helps put pressure on crude oil prices to move lower. Unemployment in August was at 9.7%, the highest level since 1983.  This has kept inventories high, especially for gasoline, the most widely used petroleum product.
     Oil's recent rise to $75 a barrel was fueled by investors tracking sentiment in the currency and equities markets and overlooking increasingly bearish supply/demand fundamentals in the U.S. oil market. Gains in stock prices gave traders hope for a recovery, which would lift oil demand.  Oil continues to be used as a safety net against the weakening dollar.  As long as Wall Street continues to use oil as a hedge against the dollar and as an investment play, without ever taking procession of the product, crude will continue to remain volatile.
     For the sixth week in a row, the U.S. average price for regular gasoline decreased. The average dipped two and a half cents to $2.55 per gallon, bringing the cumulative drop for the past six weeks to nearly 10 cents. The price on the West Coast declined for the first time since August 24, dropping a penny to $3.03 per gallon. The price in California also fell a penny, to $3.14 per gallon.
     The national average price for diesel declined for the third straight week, dropping more than a penny to $2.62 per gallon. On the West Coast, the average dipped a penny to $2.78 per gallon and the California price moved down two cents to $2.83 per gallon. 
 
Dave Jackson 
Director of Commercial Fueling
NELLA Oil Company