Oil drops on disappointing economic data

(AP) NEW YORK - The price of oil continued its monthlong slide Thursday following new reports that the U.S. economy isn't growing as fast as many hoped.

Benchmark U.S. crude lost $1.31 to $86.51 per barrel in New York, while Brent crude fell $1.70 to $101.77 per barrel in London. Oil is now the cheapest it's been all year.

Prices fell in May due to a variety of factors. On Thursday the U.S. reported that the economy grew by 1.9 percent in the first quarter, slower than first estimated. And the number of Americans seeking unemployment benefits rose last week to a five-week high.

"Those are some poor headlines," independent analyst and trader Stephen Schork said. Oil already has fallen by nearly $20 a barrel, or more than 17 percent, this month, he said. "It's hard to say how much lower oil can go."

The government also reported Thursday that U.S. oil supplies grew more than expected last week. The country is now holding 384.7 million barrels in storage, the most since 1990. Oil supplies hit record levels in the Midwest even though a key pipeline project started transporting crude this month from Oklahoma to the Gulf Coast.

The Energy Information Administration report added that oil demand was flat last week in the U.S., and wholesale gasoline demand fell by 2.6 percent when compared with the same period in 2011.

Besides the soft U.S. economy, oil prices fell throughout May as tensions eased over Iran's nuclear program, reducing chances for a conflict in the Persian Gulf that could crimp supplies. And China's manufacturing sector slowed, while Europe's banking crisis threatens to spread across the region.

The drop in oil has provided some needed relief at the gas pump as the summer driving season gets under way. The national average for gasoline fell by less than a penny Thursday to $3.62 per gallon, according to AAA, Wright Express and Oil Price Information Service. Since April the average price for a gallon of regular has dropped by almost 32 cents.

In other energy futures trading, natural gas rose 3.5 cents to $2.453 per 1,000 cubic feet after the government reported that supplies in storage increased last week about as much as expected. Supplies are about 35 percent above the five-year average.

Heating oil fell by 3.21 cents to $2.7077 per gallon, and wholesale gasoline lost 4 cents to $2.73 per gallon.