For most of the year, oil prices surged as investors pumped money into crude contracts to protect themselves from a weakening dollar. Oil was thought of as a safe bet with demand expected to rise next year.
But as crude prices doubled from March to October, consumers and businesses continued to use less gasoline and diesel. Refiners struggled. In parts of the Midwest this week, gasoline was selling at a cheaper price than the oil used to make it, according to the Oil Price Information Service.
With their business models turned upside down, many refiners decided to scale back and cut their losses. Energy Information Administration data showed this week that refiners are operating at the lowest levels ever - except for years when hurricanes disrupted operations in the Gulf of Mexico - according to analyst Stephen Schork.
"That was a wake-up call," said Phil Flynn, an analyst with PFGBest. "People are starting to realize that maybe oil isn't the best hedge against inflation."
Benchmark crude for December delivery lost 59 cents to settle at $76.35 a barrel on the New York Mercantile Exchange. Prices dipped as low as $75.57 earlier in the day, the cheapest since Oct. 15. Exxon Mobil chief Rex Tillerson said Friday oil prices would be even lower if they were based totally on supply and demand. "Oil is about $20 to $25 a barrel higher simply it's priced in dollars, and there's a weak dollar," he said after a speech at the Asia-Pacific Economic Cooperation summit.
The EIA also said Friday that natural gas stockpiles continue to be the highest on record. The U.S. crammed another 25 billion cubic feet into storage last week, putting the country's inventory at more than 3.8 trillion cubic feet.
Retail gasoline prices continued a monthlong slide. But pump prices remain well above what they were last year. A gallon of regular unleaded dropped half a cent to $2.645 a gallon, according to AAA, Wright Express and Oil Price Information Service. That's 16.4 cents more expensive than a month ago and 46.7 cents more expensive than the same time last year.
In other Nymex trading, heating oil fell 2.
49 cents to settle at $1.9661 a gallon. Gasoline for December delivery lost 2.43 cents to settle at $1.9162 a gallon. Natural gas for December delivery added 2.2 cents to settle at $4.392 per 1,000 cubic feet.
In London, Brent crude for December delivery gave up 47 cents to settle at $75.55 on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
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