Oil drops below $102 on big US supply increase

NEW YORK (AP) — Oil dropped more than 2 percent on Wednesday after the government said U.S. supplies of crude keep growing.

The Energy Department's Energy Information Administration said crude supplies rose by 9 million barrels, or 2.5 percent, to 362.4 million barrels. That's more than 1 percent above year-ago levels.

The price of benchmark U.S. oil fell $2.54, or 2.4 percent, to finish at $101.47 a barrel in New York. It hadn't closed below $102 per barrel since Feb. 15. In London, Brent crude fell by $2.52 to end at $122.34 per barrel at the ICE Futures exchange.

The decline coincided with a sell-off in U.S. stock markets. The Dow Jones industrial average and the S&P 500 index were off about 1 percent, a day after a weak bond auction in Spain caused fears about Europe's debt problems to flare up again.

Meanwhile, retail gasoline in the U.S. now averages $3.93 per gallon, according to AAA, Wright Express and Oil Price Information Service. The price of gas has risen about 65 cents this year, although the pace of the increase has tapered off in the past week.

Demand remains weak at the pump and at the wholesale level. The EIA report said gasoline demand last week was almost 4 percent below the level at the same time last year.

In other energy trading, heating oil fell by 6.66 cents to finish at $3.1609 per gallon and gasoline futures fell 6.18 cents to end at $3.3336 per gallon. Natural gas dropped 4.6 cents to finish at $2.141 per 1,000 cubic feet.

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Pablo Gorondi in Budapest contributed to this report.