Oil settles below $81 after government reports unexpected jump in crude supplies

Oil settles below $81 on jump in US crude supplies

NEW YORK — Oil prices settled below $81 on Wednesday after the government reported a larger-than-expected jump in U.S. crude inventories last week.

Benchmark crude for May delivery lost $1.30 to settle at $80.61 a barrel on the New York Mercantile Exchange. Earlier, the price dropped as low as $79.88.

The Energy Department reported that crude inventories rose by 7.3 million barrels to 351.3 million barrels last week. Analyst expected an increase of 1.67 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Oil supplies in the U.S. have risen sharply in recent weeks, belying a slow but steady overall economic recovery and suggesting consumer demand remains weak.

Oil prices also tracked lower stock prices, which fell after Fitch Ratings said Portugal’s recovery will be slower than other countries in the eurozone, hurting its ability to repay debt.

Oil analyst Andrew Lipow said debt-troubled countries like Greece and Portugal will likely pay more in interest, which could force higher taxes or sharp spending cuts.

“That means there’s less money around for consumers to spend on energy or consumer goods that would help these economies grow.”

PFGBest analyst Phil Flynn said the news about Portugal hammered the euro, strengthened the dollar and beat down dollar-denominated crude oil prices. A stronger dollar makes crude more expensive for investors in other currencies.

In other Nymex trading in April contracts, gasoline fell 4.17 cents to settle $2.2211 a gallon, and heating oil fell 3.11 cents to close at $2.0707 a gallon. Natural gas dropped 2.5 cents to settle at $4.105 per 1,000 cubic feet.

In London, Brent crude fell $1.08 to settle at $79.62 on the ICE futures exchange.

Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.