Oil drops to fresh 8-month low near $80 in Asia

[June 21, 2012]  SINGAPORE (AP) -- Oil prices dropped to fresh 8-month lows near $80 a barrel Thursday in Asia after the U.S. central bank balked at implementing vigorous stimulus measures to boost waning economic growth.

Benchmark oil for August delivery was down $1.40 to $80.05 a barrel, the lowest since October, at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange.

The contract fell $2.90 to settle at $81.45 in New York on Wednesday.

In London, Brent crude for August delivery was down $1.61 at $91.18 per barrel on the ICE Futures exchange.

The Federal Reserve on Wednesday extended an interest-rate reduction program known as Operation Twist, pledging to sell $267 billion of short-term Treasury bonds and buy longer-term Treasurys through December. However, traders had been hoping for a more aggressive stimulus package known as quantitative easing.

An unexpected jump in U.S. crude supplies also weighed on crude prices. The Energy Information Administration said oil supplies grew by 2.9 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a decrease of 600,000 barrels.

"Bears are on the cusp of smashing through the $80 level," energy trader and consultant The Schork Group said in a report. Schork said the benchmark U.S. crude could fall to $74 and Brent to $82.

Crude has plunged about 25 percent from $106 early last month amid signs of slowing economic growth in the U.S., Europe and China. However, some analysts say investors are too pessimistic about global crude demand prospects.

"Oil prices at current levels are too low and a more a reflection of risk aversion rather than any significant unwinding in demand," National Australia Bank said in a report.

In other energy trading, heating oil was down 1.5 cents at $2.57 per gallon while gasoline futures fell 2.8 cents at $2.48 per gallon. Natural gas gained 2 cents at $2.54 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

Follow Alex Kennedy on Twitter at http://twitter.com/alexkennedy_ap.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.