Oil falls below $90 a barrel

FILE - This Nov. 13, 2009 file photo shows an oil pump working in the Persian Gulf desert field of Sakhir, Bahrain. The price of oil dropped below $90 on Wednesday, May 23, 2012 for the first time in nearly seven months as U.S. supplies continue to grow. (AP Photo/Hasan Jamali)
FILE - This Nov. 13, 2009 file photo shows an oil pump working in the Persian Gulf desert field of Sakhir, Bahrain. The price of oil dropped below $90 on Wednesday, May 23, 2012 for the first time in nearly seven months as U.S. supplies continue to grow. (AP Photo/Hasan Jamali)
Posted: May 25, 2012

Oil tumbled below $90 a barrel in New York Wednesday, erasing gains through 2011, as U.S. supplies increased to a 22-year high and European leaders met to discuss the euro region’s debt crisis.

Futures fell 2.1 percent after the Energy Department said stockpiles rose 883,000 barrels to 382.5 million barrels last week. The European Union summit is the 18th since Greece was shaken by debt and the first since an anti-austerity campaign carried Francois Hollande to France’s presidency. The euro sank to the lowest level in almost two years.

“We’re heading lower because supplies continue to rise and the dollar is surging against the euro, hurting all commodities,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in Chicago. “‘I’m looking for prices to fall to the mid-$80s and eventually test last summer’s low of near $75.”

Crude oil for July delivery fell $1.95 to $89.90 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 21. Prices are down 9 percent this year.

Brent oil for July settlement fell $2.85, or 2.6 percent, to end the session at $105.56 a barrel on the London-based ICE Futures Europe exchange, the lowest level since Dec. 19.

U.S. crude inventories reached their highest level since August 1990.

Crude output increased 90,000 barrels a day to 6.24 million, the highest level since February 1999. Production has climbed 12 percent in the past year.

Gasoline inventories fell 3.3 million barrels to 201 million, the report showed. Demand for the fuel tumbled 3.8 percent to 8.63 million barrels a day, the biggest decline since the week ended Jan. 6.

The euro slipped as much as 1.1 percent to $1.2545, the lowest level against the dollar since July 2010. A falling euro reduces the appeal of raw materials as an investment. The Standard & Poor’s GSCI Index of 24 commodities was down 1.9 percent and touched the lowest level since December.

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