Oil falls for third day on weak U.S. fuel demand

By Joshua Schneyer

NEW YORK (BestGrowthStock) – Oil prices fell for a third day on Thursday, holding near a six-week low as a stronger dollar curbed demand for crude and after data showed U.S. fuel demand has not recovered from the recession.

U.S. crude oil futures settled down slightly, falling 3 cents to $73.64 a barrel, after dipping to a six-week low of $72.65 on Wednesday. Brent crude futures fell 11 cents to $72.13 a barrel.

A stronger U.S. dollar and a dip in equities markets helped push oil prices into a third day of declines. The dollar rose to its highest level in more than six months against the euro, which fell on concern over potential fiscal crises in European economies including Greece and Portugal.

A warning from S&P on the United Kingdom’s banking system, which the rating agency said no longer ranks among the world’s safest, added to jitters about Europe’s financial system.

A stronger dollar often indicates investors are funneling cash away from riskier assets like commodities. It also can curb demand for crude oil from buyers who hold other currencies, since oil is priced in dollars.

Oil prices have plunged by more than $10 a barrel since briefly rising over $84 a barrel as recently as January 11, their highest level in more than a year.

Prices are not likely to reach that high again this year, the chief executive of oil major BP told Reuters.

“I would expect that the oil price will trade within the current range for the remainder of this year, (at) $60-80 per barrel,” BP CEO Tony Hayward told Reuters in Davos, Switzerland. He noted world oil demand has fallen by 2 million barrels a day since 2007.

Fuel demand has remained weak in the United States, the world’s top consumer. Data released on Wednesday by the U.S. Energy Information Administration showed total U.S. petroleum product demand over the last four weeks fell 2 percent from the same period of 2009, a sign demand is slow to recover from lows hit during the financial crisis and recession.

“U.S. oil demand is still contracting against a level last year when it was at the worst of the recession,” said Harry Tchilinguirian, senior oil analyst with BNP Paribas.

U.S. crude stocks fell last week, EIA data showed, but gasoline and distillate stocks rose even though U.S. refinery utilization rates remained near their lowest since the 1980s.

Oil prices had risen earlier Thursday, after U.S. President Barack Obama’s state of the union speech on Wednesday night focused on U.S. job creation and not his administration’s plan to curb trading practices among banks. The speech did not reveal specific measures that could limit oil trading.

But Thursday’s U.S. economic data cast further doubt over the pace of economic recovery. Initial U.S. jobless claims fell less than expected last week, while durable goods orders increased less than expected in December.

Stock Market Report

(Additional reporting by Ikuko Kurahone in London, Robert Gibbons in New York, and Alejandro Barbajosa in Singapore; Editing by Marguerita Choy)

Oil falls for third day on weak U.S. fuel demand