Oil falls $6 as dealers see weak US demand

New York: Crude prices fell more than $6 yesterday on concerns that a big US-led economic slowdown could further undermine global energy demand.

The steep losses come in the midst of a volatile week in commodity and equity markets as dealers try to weigh signs of recession against aggressive interest rate cuts by the US Federal Reserve to counter a liquidity crisis.

US crude fell $6.01 to $103.42 a barrel by 1732 GMT, down from a record $111.80 hit Monday. London Brent crude fell $4.96 to $100.60.

"People are looking at the macro picture and are worried about the economy," said Mike Fitzpatrick, vice president at MF Global in New York. But he added "the wide swings in prices during the past few days point to uncertainty both for bulls and bears".

A report from the US Energy Information Adminstration yesterday showed US demand for gasoline running 0.1 per cent below last year, while demand for other fuels like diesel, jet fuel and heating oil lags by 5.4 per cent.

"Higher prices for gasoline and heating oil may have finally reached a level where consumers have altered their energy consumption habits," said Chris Jarvis, senior analyst at Caprock Risk Manage-ment.

The soft demand figures outweighed concern over the report's bigger-than-expected declines in refined fuel stockpiles last week and a smaller-than-expected build in crude, analysts said.

Lower inventories

US distillate inventories dipped to their lowest level since June 2005 while gasoline stocks eased slightly below their 15-year high, according to the EIA report. Crude inventories, meanwhile, rose a modest 200,000 barrels, leaving them 3.7 per cent below last year.

Analysts said part of the reason for lower inventories of refined products was a reduction in refinery activity because of poor profit margins in the midst of softer demand.

"The drop in the [refinery activity] appears to reflect some voluntary run cuts due to a poor margin environment," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.