Oil hits 7-week low on demand worries, dollar gain
Tuesday July 29, 2:21 pm ET
By Stevenson Jacobs, AP Business Writer
Oil prices tumble to 7-week low as demand worries grow, US dollar strengthens
NEW YORK (AP) -- Oil prices tumbled to their lowest level in seven weeks Tuesday as a stronger dollar and beliefs that record prices are eroding the world's thirst for energy sparked another dramatic sell-off.
The drop -- as much as $4 a barrel 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 $1.89, or 1.52 percent, to $122.84 a barrel in early afternoon trading on the New York Mercantile Exchange. Earlier, prices fell to $120.42, the lowest level for a front-month contract since June 10; they have now fallen more than $25 from their trading high of $147.27, reached July 11.
More concerns that crude's run-up over the past year has pushed prices to unsustainable levels fed Monday'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.
"We're seeing both statistical and anecdotal evidence of very rapidly weakening demand picture," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
The declines accelerated after oil briefly dipped below $122, a key resistance level that triggered technical selling by computers programed to dump oil contracts once prices fall below a certain threshold. The next technical level traders are watching is $117.
"I think we could see $117 a barrel in a one-week time frame, and this market could eventually get to $100," Ritterbusch said.
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 $1.5557 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 a further sign 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
