Oil back above $101 despite US supply growth

Oil is back above $101 per barrel after earlier losing ground when a government report showed an unexpected increase in supplies. Weakening demand for gasolene and other petroleum products was the cause.

Benchmark West Texas Interme-diate on Wednesday fell 3 cents to $101.24 per barrel in New York. Brent crude, which is used to price foreign oil that’s imported by US refineries, gave up 63 cents to $109.88 in London.

Prices dropped after the Energy Information Administration reported that oil supplies increased unexpectedly last week by 1.3 million barrels. Gasolene supplies jumped more than expected, adding 5.1 million barrels for the week ended December 2. Supplies are growing because of weak demand for oil-based fuels in the US.

Government figures show that gasolene demand in the US is on track this year to be at the lowest level since 2003.

Threat of recession

Oil has been hovering around $100 per barrel for more than a week. Investors are watching Europe’s struggles to contain a banking crisis that threatens to pull the region into recession. Widespread spending cuts are expected to reduce energy demand within Europe and among major manufacturing countries like China that export goods to the Eurozone.

European leaders are working on ways to boost fiscal discipline and reduce debts. But credit ratings agencies have questioned if they’re doing enough.

At the pump, gasolene prices rose more than a penny to $3.286 per gallon, according to auto club AAA, Wright Express and Oil Price Information Services. A gallon of regular unleaded is 12.1 cents cheaper than it was a month ago, but it’s still 32.8 cents higher than the same time last year.

In other energy trading, heating oil gave up 1.8 cents to $3.004 per gallon and gasolene futures lost 4.12 cents to $2.6042 per gallon. Natural gas dropped by 6.1 cents to $3.427 per 1,000 cubic feet.