Oil prices drop to 124 dollars in New York

Fri 2008-07-25

LONDON (AFP) — Oil prices headed south again on Friday , cutting short a brief rally amid a drop in fuel demand across the United States, the world's biggest consumer of energy.

Crude futures had risen earlier Friday and on Thursday in what traders described as a technical rebound following two days of heavy falls.

New York's main contract, light sweet crude for September delivery, shed 1.49 dollars to 124 dollars a barrel in pit trading.

Brent North Sea crude for September dropped 1.41 dollars to 125.02 dollars in electronic deals.

Ken Hasegawa, manager of the energy desk at Newedge brokerage, cited by Dow Jones Newswires, said on Friday that the market would trade in a short-term range of 123-128 dollars.

On Wednesday, crude futures had tumbled by about four dollars after a bigger-than-expected increase in US gasoline (petrol) reserves signalled weaker demand in the United States.

At the same time, concerns eased over Hurricane Dolly in the Gulf of Mexico as the storm tracked away from oil installations there.

Oil prices have shot to a series of record highs this year, partly because of political tensions involving oil-producing nations like Iran, which refuses demands from major powers to halt its disputed nuclear programme.

However prices have tumbled since striking record heights of above 147 dollars on July 11.

Analysts said the US government's latest weekly snapshot on energy inventories had suggested weaker demand for energy.

US gasoline stockpiles rose 2.9 million barrels in the week ending July 18, far outstripping analysts' consensus forecasts for a gain of 200,000 barrels.

Gasoline consumption was also 2.4 percent lower compared to a year earlier as drivers faced sky-high pump prices of 4.11 dollars a gallon (3.78 litres) during a period when US demand for motor fuel is traditionally at a peak.

"The slide in crude (futures from recent highs) has been primarily driven by concerns of weaker demand as a result of higher prices, as economic problems persist," said Michael Davies at the Sucden brokerage in London.

"Originally these fears focused on the US, with data there showing significantly lower demand for gasoline, but economic data has started to point to problems in Europe and slower growth in the key drivers of oil demand growth; China and India."