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Crude oil prices dive below $121
Oil fell more than $4 a barrel to below $121 on Tuesday, touching the lowest price since May, as signs of weakening demand outweighed a disruption to Nigerian oil output.
- Reuters
- Published: 21:40 July 29, 2008
London: Oil fell more than $4 a barrel to below $121 on Tuesday, touching the lowest price since May, as signs of weakening demand outweighed a disruption to Nigerian oil output.
The drop also coincided with a firmer US dollar, which may have reduced the appeal of commodities to some investors, and comments from Opec's president that oil could fall to $70 or $80 in the long term.
"We still believe that crude's rallies are vulnerable and we would advise not buying into them," said Edward Meir, analyst at MF Global who earlier on Tuesday said he expected an "eventual retreat" to $121-$122.
US crude was down $3.30 at $121.43 a barrel by 1509 GMT and traded as low as $120.42, the lowest since May 6. Brent crude was off $3.56 at $122.28.
The president of Opec, Chakib Khelil, yesterday called the current price "abnormal" and said he did not think the producer group should consider cutting output should prices continue to fall as markets were now balanced.
Khelil, who is also Algeria's oil minister, said oil could fall to $70 to $80 in the long term, if the US dollar continued to strengthen and geopolitical concerns eased.
Oil has fallen from a record peak of $147.27 on July 11, pressured by signs that high prices and an economic slowdown are curbing demand, especially in the United States.
The chief executive of BP, Tony Hayward, said he saw demand destruction of 5 to 10 per cent for gasoline in developed OECD economies, as people drive less due to high fuel prices.
The Energy Information Administration said on Monday US oil demand in May was 660,000 barrels per day less than previously thought. A separate government report said motorists were driving less.
Limiting oil's drop, Shell declared force majeure on its Nigerian Bonny Light oil exports for July to September following Monday's attack by militants on an oil pipeline in the Niger Delta.
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