Crude prices sink more than $3

New York: Oil prices sank more than $3 a barrel on Friday, dropping to the lowest level since early May after the dollar muscled higher and Opec predicted world demand for energy will keep falling.

Light, sweet crude for September delivery fell $3.34 to $111.67 a barrel on the New York Mercantile Exchange, after earlier falling to $111.34, its lowest since May 2 and more than $35 - or 24 per cent - below oil's July 11 trading record above $147.

As high energy costs force countries around the globe to cut back on consumption, crude prices have plummeted and are now within striking distance of $100 a barrel, a level first reached February 19.

At the pump, retail gas prices also continued to fall, with a gallon of regular shedding about half a penny overnight to a new national average of $3.771, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas peaked at $4.114 on July 17.

Crude slipped below $112 a barrel after the dollar gained against the euro on US data showing that industrial output rose more than expected in July. The euro has lost some of its luster compared to its rival amid evidence that Europe is slowing. The euro bought $1.469 in morning trading yesterday, down from $1.4811 late Thursday.

A rising dollar typically pushes oil prices lower as investors who buy crude and other commodities as hedges against inflation start dumping their positions to cut their losses. A stronger greenback also makes dollar-denominated commodities more expensive to overseas buyers, further eroding demand.

"The dollar is on fire again so that's causing people to re-evaluate everything," said Phil Flynn, oil analyst at Alaron Trading in Chicago.