By Gillian Wong / AP
Singapore: Oil prices steadied in Asian trading after shedding nearly $4 a barrel in the previous session on concerns that high fuel prices are dampening demand in the world’s biggest energy consumer.
A weekly report by the US Energy Department’s Energy Information Administration showed that gasoline demand over the four weeks ended 18 July was 2.4% lower than a year earlier, offering further evidence that Americans are cutting back on fuel.
“The worries about demand erosion in the US and an economic slowdown are really pulling prices down,” said Victor Shum, an energy analyst with consulting firm Purvin & Gertz Inc. in Singapore.
Light, sweet crude for September delivery fell 24 cents to $124.20 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract on Wednesday dropped $3.98 to settle at $124.44 a barrel, crude’s lowest finish in floor trade since 4 June.
The Energy Department’s report also showed that US gasoline stockpiles jumped 2.9 million barrels last week, far more than analysts surveyed by energy research firm Platts predicted. The decline in crude inventories was less than forecast.
“This is the summer driving season and so there’s no question that the data shows demand destruction in the US,” Shum said.
Concerns that Hurricane Dolly might affect oil and natural gas output in the Gulf of Mexico dwindled as it made landfall near South Padre Island in Texas on Wednesday. The US Minerals Management Service reported that only about 4.7% of production, about 60,000 barrels a day, has been halted because of the storm.
A stronger dollar has added to the pressure on crude prices. As recently as a week and a half ago, oil seemed on a relentless march toward $150 a barrel. Prices have now fallen in six of the last seven sessions.
“Given that pricing has dropped $20 in two weeks, the question that is on everybody’s mind now is whether the oil market has reached a tipping point,” Shum said.
“But in the past four-plus years of oil’s bull run, the market has seen significant downward corrections before. Each time, the market has come back and moved higher and established new highs,” he added.
In other Nymex trading, heating oil futures fell 0.09 cent to $3.5492 a gallon (3.8 liters) while gasoline prices lost 1.35 cents to $3.0209 a gallon. Natural gas futures dropped 5.7 cents to $9.731 per 1,000 cubic feet.
Brent crude for September delivery fell 19 cents to $125.10 a barrel on the ICE Futures exchange in London.