Oil hits 7-week low on demand worries, dollar gain
[Why is it a DEMAND WORRY when the public is using less and there is less demand? What? Does the writer think we should be using more? ]
Tuesday July 29, 5:13 pm ET
By Stevenson Jacobs, AP Business Writer
NEW YORK (AP) -- Oil prices tumbled more than $2 a barrel Tuesday, finishing at their lowest level in seven weeks as a stronger dollar and beliefs that record prices are eroding the world's thirst for energy sparked another dramatic sell-off.
The drop -- which surpassed $4 a barrel at one point during the day -- was a throwback to oil's nosedive over the past two weeks and outweighed supply concerns touched off by a militant attack Monday on two Nigerian crude pipelines. It was oil's seventh decline in the last 10 sessions.
Light, sweet crude for September delivery fell $2.54 to settle at $122.19 on the New York Mercantile Exchange. It was the lowest settlement price for a front-month contract since June 10. Earlier, prices fell to $120.42, also the lowest level since June 10. Oil has now fallen more than $25 from its trading high of $147.27, reached July 11.
[A drop of $27 but lost $2 for a total of $25 drop in oil prices.]
More concerns that crude's run-up over the past year has pushed prices to unsustainable levels fed Tuesday's decline. The U.S. Transportation Department said Monday that U.S. drivers logged 9.6 billion fewer vehicle miles in May -- or 3.7 percent -- compared to the same period last year, the biggest drop ever for the historically busy summer driving month.
And demand for oil in the U.S. -- the world's thirstiest consumer -- continues to fall, dropping by 891,000 barrels per day in May compared the same month a year ago, the Energy Department's Energy Information Administration said Monday.
[The US imports (average and it is high as an average) 300,000 barrels of oil a month (that was a Dec 07 figure). Divide it by 30 (again, a very poor means of measuring but just to give us a very simplistic approach to understanding what we use on an average day (at its peak) = 10,000 barrels a day (In Dec 07 oil was much cheaper and we used more and it was cold. Therefore, this figure is exceeding high. It is more like 9,000 at the current time). The US uses between 9 and 10 thousand barrels per day. The worlds largest econcomy, producer of food to feed the world, exporter of technology to save lives, industrial giant of new technologies to makes lives better and healthier - and we use 9,000 barrels a day. The author of this article has fed in to all the stupid and eroneaous claims about the US and its consumption of oil. In any single minute, China consumes 210,000 gallons of crude oil. China - the oppressor of freedoms, the wall that holds back the tide of truth and information. The single most oppresive government on planet earth today and alone in the repression for the last twenty years, uses 200,000 gallons in a single minute = about 5,000 barrels per minute. ]
The declines accelerated after oil briefly dipped below $122, a key resistance level that triggered technical selling by computers programmed to dump oil contracts once prices fall under a certain threshold.
"Once we break through $120, we could easily slide through to $100," said Darin Newsom, senior analyst at DTN in Omaha.
Also weighing on prices was a sharply stronger dollar compared to the euro, which made commodities less attractive to investors who have bought oil futures as a hedge against inflation and weakness in the U.S. currency.
The euro bought $1.5584 compared with $1.5752 late Monday in New York.
"It looks like oil is selling off today with the very, very strong dollar and nothing to drive it higher. Quiet seems to be bearish these days," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service in Wall, N.J.
In another sign that high prices are curbing Americans' consumption for fuel, retail gas prices fell further below the $4-a-gallon mark. The average price of a regular gas fell 1.7 cents to $3.941, according to auto club AAA, the Oil Prices Information Service and Wright Express.
Monday's attack in Nigeria targeted two pipelines believed to be owned by a unit of Royal Dutch Shell PLC and was the latest in a two-year campaign of attacks on the country's oil industry. Shell said a pipeline had been damaged in attacks and that some crude production had been shut down to prevent the oil from spilling into the environment.
The oil company said Tuesday it may not be able to fulfill some oil-export contracts because of the damage. Shell didn't specify how much oil production was cut by the attack or how long repairs would take.
The Movement for the Emancipation of the Niger Delta says it is acting to force the Nigerian federal government to send more oil industry funds to the southern region, which produces all of Nigeria's crude oil but remains impoverished after decades of corrupt and wasteful governance.
Analysts at JBC Energy in Vienna, Austria, estimated the repeated attacks on country's oil installations, Nigeria's output had fallen to just below 1.9 million barrels a day from more than 2.4 million barrels a day in 2005.
Oil market analysts are awaiting U.S. data later in the week for indications of how the world's largest economy could be expected to perform in coming months. Figures for gross domestic product for the second quarter will be released Thursday, while July auto sales and the July employment report are both due Friday.
In other Nymex trading, heating oil futures fell 8.98 cents to settle at $3.4722 a gallon while gasoline prices fell 6.23 cents to settle at $3.0077 a gallon. Natural gas futures rose 5.4 cents to settle at $9.217 per 1,000 cubic feet after trading lower most of the day.
In London, September Brent crude lost $3.13 to settle at $122.71 a barrel on the ICE Futures exchange.
Associated Press Writers Pablo Gorondi in Budapest, Hungary and Gillian Wong in Singapore and Edward Harris in Lagos, Nigeria contributed to this report.