London: Oil prices slipped to a new seven-week low yesterday in response to mounting evidence high prices and economic weakness have slowed demand in the world's top consumer the United States.
Oil has fallen by more than $23 a barrel from its record high of $147.27 on July 11, marking the biggest fall in dollar terms since futures began trading in New York in 1983.
In percentage terms, the 15 per cent decline is the steepest pull-back since early 2007.
US light crude erased modest earlier gainst to fall to a session low of $123.50 a barrel, the lowest since early June. At 1506 GMT it was hovering at $124.15, down 29 cents from Wednesday's close.
London Brent crude ticked down 29 cents to $125.00, after falling to a seven-week low of $124.10.
US crude dropped by about $4 on Wednesday after US government data showed a larger-than-expected increase in gasoline stocks, together with weak implied demand. US crude stocks dropped after a sharp decline in imports.
One potentially bullish factor was the threat from a militant group to sabotage oil facilities in exporter Nigeria, but analysts said the market was reacting to existing fundamentals, rather the prospect of future disruption.
"Warnings like this normally would spook the markets into pushing higher," said MF Global in a research note.
"We can only suggest that the market, finally weighed down by the spectre of decreasing energy demand, may not be as responsive to geopolitical headlines as it once was."
The main militant group in Nigeria's oil-producing Niger Delta said on Wednesday it would attack major oil pipelines in the next 30 days to prove it had not received payment from the government to end its campaign.
Part of the reason for the record run-up in oil prices this year has been weakness of the US dollar, which encouraged some investors to buy oil and other dollar-denominated commodities as a hedge against inflation and falls in other asset classes.
Even after the recent price fall, the oil price has still rallied by almost 30 per cent in 2008.