Singapore: Oil prices fell in Asian trade Tuesday as fears about slowing US demand outweighed the increasing likelihood of heightened tensions over Iran’s controversial nuclear programme, dealers said.
In morning trade, New York’s main contract, light sweet crude for September delivery fell $1.14 to $120.27 a barrel from $121.41 at the close of floor trading in the United States Monday.
London’s Brent North Sea crude for September delivery dropped $1.13 to $119.55 .
Oil prices fell below $120 in New York and London Monday for the first time in three months after latest US economic indicators signalled weakness in the world’s biggest economy, dealers said.
The monthly US Commerce Department survey showed Monday consumer spending, which fuels two-thirds of output, had cooled in June while inflationary pressures accelerated.
The US is the world’s biggest energy user and any signs of slowing consumer spending usually weighs down global oil demand projections.
Tropical Storm Edouard, expected to make landfall Tuesday, will likely only provide limited boost to prices as investors are more concerned with American oil demand, analysts said.
“US demand won’t recover soon. Tropical Storm Edouard should bring a short term support but demand outlook weighs on prices,” commodity analysts from Societe Generale said in a report.
Phil Flynn, an analyst from Alaron Trading, agreed demand concerns were the biggest factor dragging down market sentiment.
“Slowing demand and the hope for more supply is weighing on the market even as the geopolitics and the weather is getting wild,” said Flynn.
Tensions over Iran’s nuclear programme surged after it missed a deadline over the weekend to respond to an international package of incentives aimed at persuading Tehran to freeze uranium enrichment.
The US State Department said Monday that it and the five other powers holding nuclear talks with Iran had threatened to pursue new punitive action against Tehran.
Iran has refused to suspend uranium enrichment it says is aimed solely at producing fuel for nuclear power production.
The United States and its allies fear the programme is a cover for developing nuclear weapons.
Iran is the world’s fourth-biggest crude oil producer and traders fear supply disruptions from the Islamic republic if tensions are further heightened.