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Oil drops below $90 for 1st time since October

Analysts say oil is in an extended slump that should lead to cheaper gasoline and other petroleum-based fuels this summer.

By CHRIS KAHN
The Associated Press

5/23/2012

NEW YORK — The price of oil dropped below $90 per barrel in U.S. trading on Wednesday, the latest milestone in a weekslong decline brought on by uncertainty surrounding economies from Europe to China.

Benchmark U.S. crude fell by $1.95 to end at $89.90 per barrel. Oil has tumbled more than 15 percent this month and is at its lowest level since Oct. 21.

Brent crude, meanwhile, dropped to a new low for the year but remained above $100 a barrel. It lost $2.85 to end at $105.56 per barrel in London.

Other commodities such as copper and cotton fell sharply as well in U.S. trading.

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Analysts say oil is in an extended slump that should lead to cheaper gasoline and other petroleum-based fuels this summer.

Concern about the strength of the global economy contributed to Wednesday's decline. Europe's leaders gathered in Brussels amid questions on their willingness to take the steps necessary to spur economic growth. Some economists have warned of a "severe recession" in the 17 nations that use the euro currency. Elsewhere, China says its economy is cooling down, while the pace of growth has tailed off in the U.S. after hitting 3 percent in the last three months of 2011.

The latest report on U.S. crude supplies also depressed oil prices Wednesday. The government said U.S. supplies grew last week by 900,000 barrels to 382.5 million barrels, the highest level since 1990. Analysts expected supplies to grow by 750,000 barrels. The price of oil and other commodities tend to fall as more supplies become available.

Gasoline already has dropped by nearly 26 cents per gallon since early April. The U.S. average is now $3.68 per gallon; some experts say it could fall as low as $3.50 by Independence Day. The average price of diesel fuel is below $4 for the first time since February. It's good news for an economy that has slowed down since last year's fourth quarter.

In other futures trading, heating oil fell by 4.9 cents to end at $2.812 per gallon while wholesale gasoline lost 6.5 cents to finish at $2.872 per gallon. Natural gas added 3 cents to finish at $2.737 per 1,000 cubic feet.

Kevin Jones of The Trucker staff can be reached for comment at kevinj@thetrucker.com.

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