Oil drops near $87; natural gas falls 8 pct

[August 03, 2012]  NEW YORK (AP) -- The price of oil dropped 2 percent on Thursday after the head of the European Central Bank failed to take immediate action to prop up the weak eurozone economy.

Fuel demand in Europe has slackened, with six of the 17 nations that share the euro in recession

ECB President Mario Draghi said last week that he would do "whatever it takes" to save the euro. To many, that meant Draghi would move quickly to spark borrowing and spending in the European Union.

So far he hasn't delivered. In a speech on Thursday, Draghi suggested the ECB could buy bonds to lower borrowing costs for European countries. But he offered no specific measures. Draghi's counterpart in the U.S., Federal Reserve Chairman Ben Bernanke, also declined to announce any new stimulus measures after a Fed policy meeting on Wednesday.

Benchmark U.S. crude lost $1.78 to end the day at $87.13 per barrel in New York.

"There's just some disappointment out there that they're not going to move dramatically right now," said Phil Flynn, an oil analyst with Price Futures Group. "There is still a belief that Draghi will do something eventually."

Meanwhile, natural gas prices plunged 7.9 percent after the U.S. said supplies grew more than expected last week. The Energy Information Administration reported that natural gas supplies grew by 28 billion cubic feet. The nation's supply is now 14.5 percent higher than the five-year average.

Natural gas prices had been rising this summer as homeowners cranked up air conditioners and increased demand for gas-generated power. But the government report showed that demand still isn't strong enough to cut into the country's surplus of natural gas.

Natural gas dropped 25.1 cents, or 8 percent, to end at $2.92 per 1,000 cubic feet.

At the pump, retail gasoline prices added 1.3 cents to a national average of $3.534 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded has jumped by more than 20 cents since the beginning of July. It's still 40 cents cheaper than its peak price for the year in April.

In other futures trading, heating oil lost 1.65 cents to finish at $2.8423 per gallon while wholesale gasoline added 3.54 cents to end at $2.8696 per gallon.

Brent crude, which helps set the price for imported oil, lost 6 cents to end at $105.90 per barrel in London.

[Associated Press; By CHRIS KAHN]

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