Oil prices headed south again this week, leaving them about US$20 off record highs amid a drop in fuel demand across the US, the world’s biggest consumer of energy.
Crude futures had risen earlier on Friday and on Thursday in what traders described as a technical rebound following two days of heavy falls.
Ken Hasegawa, manager of the energy desk at Newedge brokerage, cited by Dow Jones Newswires, said on Friday that the market would trade in a short-term range of US$123 to US$128.
On Wednesday, crude futures had tumbled by about US$4 after a bigger-than-expected increase in US gasoline reserves signaled weaker demand in the US.
At the same time, concerns eased over Hurricane Dolly in the Gulf of Mexico as the storm tracked away from oil installations there.
Oil prices have shot to a series of record highs this year, partly because of political tensions involving oil-producing nations like Iran, which refuses major powers’ demands to halt its disputed nuclear program. However prices have tumbled since striking record highs above US$147 on July 11.
Analysts said the US government’s latest weekly snapshot on energy inventories had suggested weaker demand for energy.
US gasoline stockpiles rose 2.9 million barrels in the week ending July 18, far outstripping analysts’ consensus forecasts for a gain of 200,000 barrels.
Gasoline consumption was also 2.4 percent lower compared to a year earlier as drivers faced sky-high pump prices of US$4.11 a gallon (3.78 liters) during a period when US demand for motor fuel is traditionally at a peak.
“The slide in crude [futures from recent highs] has been primarily driven by concerns of weaker demand as a result of higher prices, as economic problems persist,” said Michael Davies at the Sucden brokerage in London.
“Originally these fears focused on the US, with data there showing significantly lower demand for gasoline, but economic data has started to point to problems in Europe and slower growth in the key drivers of oil demand growth; China and India,” Davies said.
By Friday, New York’s main oil futures contract, light sweet crude for September delivery slid to US$124 a barrel from US$131.15 a week earlier. Brent North Sea crude for September dropped to US$125.02 from US$132.30.