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Crude oil falls to lowest close since May 6

Crude oil fell more than $2 a barrel, and gasoline dropped the most in two months on a larger-than-expected U.S. fuel-supply gain and signs that demand will weaken after the surge to record prices.

Gasoline inventories rose 2.94 million barrels last week, the most since February, the Energy Department said Wednesday. Stockpiles of distillate fuel, including heating oil and diesel, rose 2.28 million barrels, the most since July. Fuel demand was down from a year ago, the agency report showed.

"It's pretty clear that demand will be very poor this summer," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. "Refiners are making the fuel, but nobody wants to buy it."

Crude-oil futures for July delivery fell $2.01, or 1.6 percent, to $122.30 a barrel on the New York Mercantile Exchange, the lowest closing price since May 6. Futures, which reached a record $135.09 a barrel May 22, are up 85 percent from a year ago.

So the big question for consumers: If crude continues to lag, when will gasoline follow it?

Gasoline prices generally lag behind oil prices.

But in Tarrant County, just as they did throughout the country, gas prices went in the opposite direction of crude Wednesday.

In Fort Worth-Arlington, the price of gas ticked up almost a half-cent to $3.86 a gallon for regular unleaded. The price was $3 a gallon this time last year.

Good luck figuring out exactly when the drop in oil will show up at local gas stations, said Dan Ronan, an Irving-based spokesman for AAA Texas.

"There's so many factors in this," said Ronan, whose father-in-law worked in the gas-station business. "The fact that it's dropping can be nothing but good news for motorists eventually. When? Not sure."

One of the factors is when a station owner receives a new shipment of gasoline. When that happens, it's almost always a new price.

QuikTrip, which has 56 of its 500 gas stations in Dallas-Fort Worth, has one of the highest turnover rates in gas shipments. An average pump is refilled one and a half times a day, said Mike Thornbrugh, a spokesman for the Tulsa-based chain.

But for gas prices to go down, the turbulent market for crude oil must smooth out, Thornbrugh said.

"You have these wild swings," he said. "Unfortunately, what we've been seeing is when you have one down day or two down days, it comes right back, and it's back up again."

Right now, there's a lot of apprehension in the fuel market, he said.

"Let's see if the trend is truly happening," Thornbrugh said, "and then the marketplace will follow."

Staff writer David Wethe contributed to this report, which contains material from Bloomberg News.