Singapore: Oil prices fell below $119 in Asian trade Wednesday on continued worries about waning demand amid signs of slowing global economic growth, dealers said.
In morning trade, New York’s main contract, light sweet crude for September delivery, was off 49 cents at $118.68 a barrel.
New York oil prices have slumped almost 20% since hitting a record high of $147.27 on 11 July due to renewed fears about the slowdown in the US economy.
London’s Brent North Sea crude for September delivery was down 37 cents at 117.33.
Prices also lost support from the diminishing threat of a storm in the Gulf of Mexico, home to major oil installations, dealers said.
“The decline in oil prices largely reflects ongoing worries that oil demand has weakened, especially in the US,” said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.
“As well, it appears that Tropical Storm Edouard has had only a limited impact on oil production in the Gulf of Mexico.”
The storm made landfall Tuesday on the Texas coast in the Gulf of Mexico. The market had initially feared Edouard would turn into a hurricane that could disrupt oil output.
The slowing US economy is once again the main concern for investors as the US Federal Reserve, in a widely expected move, kept its main interest rate unchanged at 2% Tuesday citing concerns about sputtering economic growth and inflationary pressures.
The Fed said that relatively low rates should eventually fire up growth going forward, but warned that multiple hurdles stand in the path of a potential economic revival.
“Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters,” the central bank cautioned.
The United States is the world’s biggest energy user and slower economic growth tends to weigh on global oil demand projections.
Most economists expect the Federal Open Market Committee, chaired by Ben Bernanke, to keep the key federal funds rate on hold for some time to come.
The market was waiting for the release later Wednesday of the US government’s weekly report on energy stockpiles.
A survey of analysts by Platts showed expectations of a decline of 1.2 million barrels of crude and a drop of 1.4 million barrels in gasoline reserves in the past week.