Oil dropped to its lowest level since early May as the services industries in the U.S. and Europe shrank for a second straight month in July. Tropical storm Edouard was downgraded to a depression after it made landfall on the Texas coast and missed oil-production areas in the Gulf of Mexico.
Crude oil for September delivery fell as much as $1.07, or 0.9 percent, to $118.10 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $118.50 at 1:34 p.m. Singapore time. Yesterday, oil fell $2.24, or 1.8 percent, to settle at $119.17 a barrel in New York. Earlier, it touched $118, the lowest since May 5.
Oil has lost more than $28 since touching a record $147.27 a barrel in New York on July 11 as unprecedented fuel costs prompted U.S. consumers to limit spending. On Aug. 3, the UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials fell 3.5 percent, its biggest loss since March.
The economy in China, the world's second-largest energy user, grew at the slowest pace since 2005 in the second quarter while manufacturing in July contracted for the first time since a survey began in 2005.
Oil has also fallen as its appeal as an inflation hedge has been curbed by gains in the dollar against the euro and yen. The dollar traded near a seven-week high against the euro, and was near its highest versus the yen in more than a month. U.S. Federal Reserve policy makers left interest rates unchanged yesterday amid weak economic growth.
U.S. gasoline demand fell for a 15th consecutive week, as motorists cope with high fuel prices by driving less, according to a MasterCard Inc. report yesterday. Demand last week dropped 3.4 percent from a year earlier, MasterCard, the second-biggest credit-card company, said in its weekly SpendingPulse report.
The U.S. Energy department may say in its weekly report today that gasoline supplies fell 1.5 million barrels last week, a Bloomberg survey predicted.