Gas dips below $2.50 for first time in 2 months

The average retail price for gasoline dipped below $2.50 a gallon for the first time in two months Monday as swelling oil supplies and slumping demand overshadowed even a fire at a major U.S. refinery.

Friday's fire at a Tesoro refinery in Los Angeles, which processes roughly 100,000 barrels of crude oil a day into gasoline, jet fuel and other products, will likely lead to some higher pump prices in California, but the effect is muted elsewhere, said analyst and trader Stephen Schork.

Gasoline demand is so weak that even "a material disruption to supply to one of the largest markets in the world barely registered with the speculators on the NYMEX," Schork wrote.

The average price for a gallon of regular gasoline fell a half a penny overnight to $2.499, according to auto club AAA, Wright Express and Oil Price Information Service. That's 11 cents less than a month ago, and nearly $1.16 below what drivers were paying at this time last year.

Wholesale gasoline for October delivery on the New York Mercantile Exchange rose about 1.2 cents to $1.6323 a gallon.

Meanwhile, benchmark crude for November delivery gained 49 cents to $66.51 a barrel after adding 13 cents on Friday.

It appeared last week that prices could be headed for a sizable drop, at least until tensions flared over Iran's nuclear program during the Group of 20 summit. About 20 percent of the world's crude is carted through the Straits of Hormuz on Iran's southern coast and any showdown between the West and Iran could threaten that route.

In the U.S., the most closely watched economic indicator this week will be the Labor Department's monthly jobs report on Friday. Investors will also get reports on home prices, manufacturing, consumer confidence, construction spending and factory orders.

In other Nymex trading, heating oil gained 1.57 cents to $1.6928 a gallon, and natural gas fell 17 cents to $3.816 per 1,000 cubic feet.

In London, Brent crude rose 14 cents to $65.25 on the ICE Futures exchange.

,,,

Associated Press Writers Pablo Gorondi in Budapest, Hungary, and Alex Kennedy in Singapore contributed to this report.