Price of oil dips below $50 before settling at $50.48

NEW YORK - Oil prices briefly fell below $50 a barrel yesterday for the first time since May 25, 2005, after the government reported larger-than-expected jumps in crude-oil and gasoline inventories.

Oil has dropped 17 percent since the end of 2006 amid weeks of mild winter weather in the U.S. Northeast, a key consumer of heating fuels, and growing energy stockpiles.

"There's no doubt that this is significant," said Phil Flynn of Alaron Trading Corp. "If you're a bull, the only thing you can hold your hat on is they didn't close below $50."

The price for a barrel of light, sweet crude for February delivery fell as low as $49.90 on the New York Mercantile Exchange, but spent only a moment below the $50 threshold. It settled at $50.48, down $1.76 from Wednesday's settlement price.

Jim Ritterbusch, president of Ritterbusch & Associates, said prices could continue to fall toward $47 in the next two weeks, unless the Organization of Petroleum Exporting Countries calls for a meeting.

"The market is still seeking a bottom," he said, "and we had another bearish element tossed at it in the form of these negative weekly statistics."

U.S. crude-oil stocks rose 6.8 million barrels, to 321.5 million, according to a report by the Energy Information Administration. Analysts had been expecting an increase of 325,000 barrels, according to a Dow Jones Newswires survey. The energy agency said inventories were above the upper end of the average range for this time of year.

Gasoline inventories, meanwhile, rose 3.5 million barrels, to 216.8 million, above analysts' expectations of a rise of 2.6 million barrels. Inventories of distillate fuels, which include heating oil, rose 900,000 barrels, to 141.9 million. Analysts had expected an increase of 1.3 million barrels.

The energy agency said inventories for gasoline and distillate fuels were at or above the upper end of the average range for this time of year.

March Brent crude on London's ICE futures exchange fell $1.03, to $51.75.

Heating oil lost 2.9 cents, to $1.4707, a gallon while natural gas futures rose 9 cents, to $6.324, per 1,000 cubic feet.

Gasoline prices fell 2.3 cents, to $1.3553 a gallon.

Earlier in the day, prices were buffeted by a recent cold spell in the Northeast United States and forecasts of slow demand growth from the International Energy Agency.

In lowering expectations for this year as well as revising last year's figures downward, the Paris-based energy agency cited mild winter weather that has crimped energy demand, and weaker expectations for U.S. economic growth.

In its closely watched monthly oil market report, the energy watchdog forecast global growth in oil demand this year at 85.77 million barrels a day, down 160,000 barrels a day. And it said oil-demand growth last year was 120,000 barrels a day lower.

Oil powerhouse Saudi Arabia remains undeterred by crude's recent drop.

Saudi oil minister Ali Naimi, who earlier this week said he opposed calls from other OPEC members for new cuts in production, announced yesterday that his country planned to increase its crude-oil production capacity nearly 40 percent by 2009 and double its refining size over the next five years to keep pace with growing global demand.