AP
Oil prices dip again on signs of waning demand
Tuesday August 12, 5:57 pm ET
By Madlen Read, AP Business Writer
Crude slips as IEA lowers oil demand forecast for developing nations; dollar keeps recovering


NEW YORK (AP) -- Oil prices fell again Tuesday, dampened by a stronger U.S. dollar and more evidence that developed countries such as the United States are cutting back on their energy use.

Light, sweet crude dipped by $1.44 to settle at $113.01 a barrel on the New York Mercantile Exchange, after falling as low as $112.31, a new three-month low. Oil is now nearly $35 below its July 11 record high of $147.27.

The International Energy Agency lowered its forecast on Tuesday for oil product demand from 30 developed countries, located mostly in Europe and North America, to 48.6 million barrels a day, down 1.3 percent from last year.

The Paris-based energy watchdog's report arrived a day after China said its crude imports in July, while historically strong, were down 7 percent from the same month last year.

The IEA cautioned that it is too early to determine whether the recent fall in oil prices is a longer-term trend. It said demand in developing countries could offset declines in developed nations, and that it sees Chinese oil demand continuing to grow at a robust pace.

And some economists have said that given the pullback in gasoline prices, demand could come back if motorists feel more comfortable with the cost of filling their gas tanks. The average U.S. retail gasoline price was $3.799 a gallon on Tuesday, according to auto club AAA, the Oil Price Information Service and Wright Express. That is down a penny from Monday, and down 31.5 cents from its July 17 record high.

But the energy markets -- which have seen heavy liquidation from large speculative funds since crude hit its record high -- continued to make the bet that energy use is on the wane.

"The market's still heavily focused on demand deterioration," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

A stronger dollar also weighed on oil prices. The euro traded at $1.4914, about the same as late Monday but at its lowest levels since February. The pound, meanwhile, fell to $1.8988, trading at its lowest levels since November 2006.

"Sometimes the cause and effect is difficult to define. It's a self-perpetuating, vicious circle going on, where oil falls, strengthens the dollar, then the strengthening dollar forces oil down more," Ritterbusch said.

Meanwhile, traders continued to watch the conflict between Russia and Georgia, trying to figure out whether Russia's push into the country will result in a serious oil supply disruption. Russia ordered a halt to military action in Georgia on Tuesday, but Georgia insisted that Russian forces were still bombing and shelling.

BP PLC said Tuesday it shut down the 90,000-barrel-a-day oil pipeline running from Baku on the Caspian Sea to Supsa on Georgia's Black Sea coast earlier. The London-based oil company emphasized, however, that the move was precautionary.

Another larger pipeline operated by BP in the former Soviet Republic is already out of action after a fire last week on its Turkish stretch. A third pipeline in Georgia that BP uses to export oil, but does not operate, remains open.

In other Nymex trading, heating oil fell 4.14 cents to $3.0781 a gallon, while gasoline futures slipped 2.34 cents to $2.8432 a gallon. Natural gas futures slid 1.9 cents to $8.33 per 1,000 cubic feet.

On London's ICE futures exchange, Brent crude for September fell $1.52 to $111.15 a barrel.