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Oil prices fall as supplies grow

Oil prices fall as supplies grow

March 28th, 2012 in News

NEW YORK (AP) - Oil prices dropped 2 percent Wednesday amid indications that Western nations may be considering a release of oil reserves onto the world market. In the U.S., the supply of oil is already ample, and growing.

Benchmark U.S. crude fell $2.27 to $105.07 per barrel in New York while Brent crude lost $1.67 to $123.87 per barrel in London.

Prices tend to fall as supplies go up. U.S. supplies surged last week by twice the amount that analysts were expecting, according to government data released Wednesday. And French officials said the U.S. and Europe are thinking of supplying markets with more oil from emergency reserves in hopes of pushing prices even lower.

The tactic briefly worked last summer. At the time, the concern was the loss of Libyan oil, then about 2 percent of global output. This time, policy makers are concerned that a prolonged standoff with Iran could disrupt supplies.

Western nations fear that Iran is developing a nuclear weapon, and they've been putting pressure on the oil-rich nation to open its facilities to inspection. Iran denies the claim, though it has turned away international inspectors who could confirm it.

The rise in oil has driven up U.S. gasoline prices by 19 percent this year. The national average climbed Wednesday, adding more than a penny to $3.911 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Experts say gasoline could rise as high as $4.25 per gallon this year, breaking the record of $4.11 per gallon set in 2008.