OIL FALLS BELOW $ 50 ON IRAN

Gas could reach lows of $ 2 a gallon by end of year

Oil prices tumbled below $ 50 a barrel Wednesday for the first time in nearly four months as bloated U. S. inventories and expectations of a rise in Iranian oil shipments fueled concerns that supplies are building as global demand is waning.

“We’ve had a lot of supply,” says Tom Kloza, global head of energy analysis for the Oil Price Information Service. “Now the worry is that demand is going lower.”

West Texas crude for September delivery closed down 2.3% at $ 49.17. That’s down nearly 20% from a peak of $ 61.01 in late June.

The Obama administration’s proposed nuclear deal with Iran would lift sanctions and could allow Iran to ship significantly more oil, adding to a recent surge in supplies from Saudi Arabia and Iraq. A Senate hearing on the deal is set for Thursday.

Phil Flynn with Price Futures Group says fears of an Iranian oil surge are largely unfounded because it will take months for Iran to ramp up production facilities.

Driving Wednesday’s fall was an Energy Department report that oil stockpiles rose 2.5 million barrels last week even though U. S. refiners processed the most oil on record dating back 26 years. Analysts had expected supplies to drop. “That’s raising questions in a lot of people’s minds of what crude inventories are going to be” in the fall, says Andy Weissman of EBW Analytics.

If storage tanks in Cushing, Okla., the nation’s delivery point for oil futures contracts, reach their limit, it could throw more oil onto an oversupplied market.

Also contributing to Wednesday’s decline was growing specu- lation that the Federal Reserve will raise interest rates as early as September, pushing up the dollar to a nearly four- month high. A rising greenback makes U. S. oil products more expensive for buyers paying in foreign currencies.

After hitting a low of about $ 43 in March, crude prices had been rising until recently on sharp production cutbacks in the USA and overseas. Kloza expects gas prices, inflated by the busy summer season, to hit lows of about $ 2 a gallon by the end of the year.