BANGKOK, Thailand (AP) — Oil prices held steady below $129 a barrel Wednesday in Asia after dropping more than $3 in the previous session on a growing sense that soaring prices have cut demand for gasoline and other fuel.
The normally busy summer driving season in the U.S. kicked off with the just-ended Memorial Day weekend, and some analysts are predicting that data will show it had a lackluster start.
“It definitely was lower than (previous) Memorial Day weekends,” said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.
U.S. Energy Department data covering the weekend won’t be released until next week.
The United States is the world’s largest energy consumer in terms of total use, and fluctuations in demand there can have an outsized impact on international oil prices. Also, since Americans are particularly reliant on their cars dues to a lack of mass transport in all but a few cities and they have to drive longer distances to their jobs, their consumption of gasoline is closely watched.
Midday in Singapore, light, sweet crude for July delivery was up 6 cents at $128.91 a barrel in electronic trade on the New York Mercantile Exchange. The contract fell $3.34 to settle at $128.85 a barrel Tuesday, the first day of trade after the Memorial Day holiday.
Tuesday’s drop was oil’s biggest one-day decline since March 31. The front-month contract is now more than $6 off its all-time peak of $135.09 a barrel reached last Thursday.
The decline came in the face of supply problems in Mexico and Nigeria that could have driven oil prices higher. That’s an indication that demand concerns are weighing on the market and giving investors reason to pull back from the record high oil prices, analysts said.
Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Mass., said he thinks energy investors are selling on recent data showing that Americans are driving less due to high prices. That includes weekly Energy Department reports that show gasoline demand is falling and Federal Highway Administration data showing Americans drove fewer miles in March.
“If present trends continue, we could be heading for the first annual drop in gasoline consumption in some 17 years,” said Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Oil prices were also pressured Tuesday by the dollar, which gained ground against the euro. Investors who buy commodities such as oil as a hedge against inflation when the dollar falls tend to sell when the greenback strengthens. Also, a rising dollar makes oil more expensive to overseas investors.
Investors shrugged off a number of events that could have sent oil prices higher, including news that crude oil production in Mexico fell 13 percent in April compared to the previous year, the temporary shutdown of a North Sea oil platform and the latest in a spate of oil-pipeline bombings in Nigeria.
Investors also ignored continued strength in heating oil futures, which have over the last month helped send crude oil smashing through a string of new record highs. Distillate supplies worldwide are seen as strained due to strong demand for diesel from Europe and Asia.
In other Nymex trading, June heating oil futures fell 0.11 cent to $3.7981 a gallon while gasoline futures fell 0.53 cent to $3.3777 a gallon. Natural gas futures fell 1.9 cents to $11.782 per 1,000 cubic feet.
July Brent crude was flat at $128.31 a barrel on the ICE Futures exchange in London.
News Source: http://edition.cnn.com/2008/BUSINESS/05/28/oil.prices.ap/index.html#cnnSTCText
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