Barring occasional periods of hurricane-related refinery outages, the rate was the lowest since the 1980s, according to DOE data. "Consumer demand is weak, and it all starts from there," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. US crude oil for March delivery, the new front-month contract, settled $1.66 lower at $76.08 a barrel, after dipping to $75.66, the lowest price since December 23.
-- US refinery activity drops sharply
Prices have slid sharply since crude hit a 15-month high of $83.95 on January 11. In London, Brent crude fell $1.74 to settle at $74.58 per barrel. US crude oil inventories dipped by 400,000 barrels to 330.6 million barrels last week in the world's largest energy consumer, the DOE said, but the small unexpected crude decline was overshadowed by the fall in refinery rates, suggesting a fuel demand slump has continued.
"Until we get refinery rates up, it looks like crude oil demand is just lacklustre," optionsXpress analyst Mike Zarembski said. Oil traders shrugged off last week's drop in US distillate stocks, which include diesel and heating oil. Distillates declined by 3.3 million barrels to 157.1 million barrels, while gasoline inventories rose by 3.9 million barrels to 227.4 million barrels.
A proposal by President Barack Obama on Thursday to cut proprietary trading at large banks that took US government bailouts over the past 18 months also led to selling of commodities like oil. Prices were also weighed down by concerns China will take further measures to temper its booming economy, after it posted double-digit growth in the fourth quarter for the first time since 2008.
China's annual gross domestic product growth accelerated in the fourth quarter to 10.7 percent - the fastest in two years - from a revised 9.1 percent in the third, the National Bureau of Statistics said Thursday. China's economy grew by 8.7 percent for all of 2009. Prices are 47 percent below their July 2008 record high near $150, but are than double the lows near $32 reached by the end of that year.