London: Oil fell to $108 a barrel on Wednesday, weighed down by slowing demand in the United States and other consuming nations and signs the US oil sector would recover quickly from Hurricane Gustav.
US crude traded down $1.62 to $108.09 a barrel by 0857 GMT after settling below its 200-day moving average for the first time since May 2007 on Tuesday.
London Brent crude fell $1.63 to $106.71 a barrel.
Prices have tumbled more than $7 from Friday on expectations Hurricane Gustav would hit US Gulf of Mexico oil installations as it churned toward the coast.
Initial checks showed little damage to US installations from the storm after companies shut down 13 refineries and shut in all of the 1.3 million barrels per day (bpd) of oil production in the Gulf and 95.4% of the region’s natural gas output.
Analysts said that with no signs of major damage from the storm, slowing demand in the United States and other consumer nations would continue to weigh on oil prices, which have plummetted from a record over $147 in July.
“It’s the economy, economy, economy. Everyone’s worried about demand destruction,” said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp.
Surging oil demand in emerging economies such as China and India underpinned a six-year rally in crude prices that sent prices up sevenfold at their peak.
Further strength this year came from a rush of cash from investors buying commodities as a hedge against inflation and the weak US dollar. Gains in the greenback against other major currencies over the past two months have helped push crude prices down nearly $40 a barrel.
The dollar rose to an 11-month high against a basket of major currencies on Wednesday, on a souring global economic outlook.
Traders are also eyeing more storms brewing in the Atlantic. Tropical Storm Hanna may possibly strike the US East Coast, while Hurricane Ike continued westward across the Atlantic and was projected to be in the vicinity of the Bahamas by Sunday.
A Reuters poll of analysts, ahead of US government oil inventory data to be released on Thursday, forecast stockpiles of crude rose 100,000 barrels last week, a 1.3 million-barrel drawdown in gasoline supplies and a 500,000-barrel build in distillates.
The data, released a day later than usual due to Monday’s public holiday, will not capture most of the supply disruptions caused by Gustav, analysts said.