Oil prices on Wednesday ended a 16-day slump that already has cooled off gasoline prices ahead of the summer driving season.
Benchmark crude for June delivery added 46 cents to settle at $69.87 a barrel during a volatile day on the New York Mercantile Exchange. Earlier in the day, prices dropped as low as $67.90 — the cheapest oil has been since Sept. 30.
Most of the trading already has moved away from the June contract, which is set to expire on Thursday. The July contract fell 22 cents to settle at $72.48 a barrel.
Crude contracts have given up about 21 percent of their value since hitting an 18-month high on May 3, and the drop in price is starting to show up at the gas pump.
Retail gas prices slipped again overnight, ahead of the Memorial Day weekend. A gallon of regular unleaded fell less than a penny to a new national average of $2.852, according to AAA, Wright Express and Oil Price Information Service.
Gasoline is 1 cent cheaper per gallon than it was a month ago, but it's still 53.8 cents more expensive than the same time last year. Experts, including economists at the Energy Information Administration, had predicted that average gas prices would jump above $3 a gallon this summer. Many now say that isn't going to happen.
Many analysts believe that oil prices are destined to rise in the long run, but the direction they may take in the near term is unclear. Oil prices have been tumbling for weeks as Europe struggles to contain its debt crisis. The situation has rippled through equities and commodities markets around the world, pushing the euro lower, which has in turn lifted the dollar. Oil, which is priced in dollars, tends to fall as the greenback rises and makes oil contracts tougher to buy with foreign money.
Crude prices also have plunged as big investors take advantage of a huge markup between the June and July oil contracts. The July contract is currently worth about $3 a barrel more than the June contract, which means investors can make money by simply storing their June oil and selling it a month later.
As a result, supplies at the benchmark delivery point in Cushing, Okla., have bulged to an all-time high. That forces prices even lower.
"There's a lot of opportunism happening there," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Overall, crude supplies grew less than expected last week to 362.7 million barrels, according to the Energy Information Administration. Gasoline supplies dropped to 221.8 million barrels.
Analysts continue to monitor effects of the Gulf of Mexico oil spill on the country's oil supplies. The massive spill isn't expected to affect energy prices this year. But if it alters U.S. interest in offshore drilling, Credit Suisse analyst Ed Morse said the spill could shape up to be "as bullish an item as one can think of" for oil prices in coming years.
In other Nymex trading in June contracts, heating oil fell 3.23 cents to $1.9292 a gallon, and gasoline dropped 3.38 cents to $2.0093 a gallon. Natural gas tumbled 18.2 cents to $4.160 per 1,000 cubic feet.
In London, Brent crude's July contact fell $1.35 to $73.08 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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