Crude-oil tumbled 4.8% as swelling fuel supplies and weak demand due to superstorm Sandy weighed on a market already pressured Wednesday by a broad post-election selloff.
U.S. stockpiles of oil and gasoline jumped last week as Sandy's devastation derailed shipments of fuel into the East Coast and forced refineries to shut down, according to data released Wednesday by the Energy Department.
The report helped confirm that Sandy has had a bigger effect on demand than supply despite long gas lines across New York and New Jersey. Gasoline stockpiles rose by 2.9 million barrels, while East Coast demand for gasoline and other fuels fell 6% last week, the data showed.
"The market was surprised by the gasoline build," said Gene McGillian, a broker at Tradition Energy. "There's ample supply."
Light, sweet-crude oil futures for December delivery settled $4.27 lower at $84.44 a barrel on the New York Mercantile Exchange, the lowest since July and the largest one-day drop in nearly a year. Brent crude oil on the ICE futures exchange dropped $4.25 to $106.82 a barrel.
Front-month December reformulated gasoline blendstock, or RBOB, settled 11 cents, or 4.1%, lower at $2.5889 a gallon. December heating oil settled 3% lower at $2.9621 a gallon.
Oil and fuel products fell along with stock markets, copper and other assets dependent on a continued economic recovery in the wake of the U.S. election Tuesday night. President Barack Obama was re-elected while Republicans maintained control of the House of Representatives, setting up a showdown over fiscal policy through the end of the year.
Investors said Mr. Obama's victory only paves the way for a partisan battle over what is known as the fiscal cliff--a series of automatic tax increases and spending cuts--that could weigh on economic growth or even lead to a mild recession.
Partisan brinkmanship will likely continue and weigh on financial markets, said Jason Schenker, president of Prestige Economics, a forecasting firm.
"We're going to get more of this 'kick the can down the road' sort of thing," Mr. Schenker added.
Oil prices have been on a steady decline since peaking at $99 a barrel in mid-September. Rising supplies from the U.S. and other regions have come amid falling demand as the global economy has appeared to weaken.
Oil futures saw some of the steepest declines Wednesday, which dragged down shares of Exxon Mobile Corp. (XOM), Chevron Corp. (CVX) and other energy companies.
The increase in U.S. gasoline stockpiles--after analysts had expected a drop--was due to a large inventory increase along the Gulf Coast.
The Colonial Pipeline, which sends fuel to the Northeast from Gulf refineries, was closed for several days last week after the storm flooded gasoline-distribution centers around New York harbor.
And traders and analysts say a nor'easter hitting the New York area Wednesday and Thursday could lead to another dip in demand as drivers stay off the roads.
Sandy "was a shock to the system, and the storm we're getting today is going to roll us again," said Mike Guido, head of energy hedge-fund sales at Macquarie in New York.
Copyright (c) 2012 Dow Jones & Company, Inc.
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