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Bernanke warning, release of reserves send oil prices on a free fall

NEW YORK  — Oil is tumbling after Federal Reserve Chairman Ben Bernanke warned that the U.S. economy is weaker than previously thought and the International Energy Agency said it was releasing 60 million barrels of oil to make up for a loss of Libyan exports.

The IEA announcement further evidence that the rebellion in the oil-rich country has tightened global supplies.

Benchmark West Texas Intermediate for August delivery lost $3.86 to $91.55 per barrel on the New York Mercantile Exchange. Brent crude, which is used to price many international varieties, lost $5.16 to $109.05 per barrel on the ICE Futures Exchange.

Meanwhile, retail gasoline prices in the U.S. dropped for the 20th consecutive day to $3.612 per gallon.

Bernanke warned Wednesday that the U.S. economy is weaker than previously forecast, and lowered this year's gross domestic product growth estimate to 2.9 percent from 3.3 percent.

Bernanke also said the Fed doesn't plan to extend a program of Treasury purchases, known as quantitative easing. Analysts credit the policy with boosting monetary liquidity and helping push crude prices higher.

"Without the Fed making extensive asset purchases, we see the engine of inflation stalled out," energy consultant Cameron Hanover said in a report. "That should affect oil prices longer term."

Strong demand from emerging markets helped crude rise to almost $115 early last month. Demand growth in China, the world's second-largest oil consumer, remains robust but has slipped slightly in recent months.

helped crude rise to almost $115 early last month. Demand growth in China, the world's second-largest oil consumer, remains robust but has slipped slightly in recent months.

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