Oil Falls for a Third Day

Crude oil fell for a third day on signs that a U.S. economic slump will extend into 2009, paring fuel demand in the world's biggest oil consumer.
TradingEconomics.com, Bloomberg 8/12/2008 6:43:17 AM

The U.S. economy will grow at an average 0.7 percent annual pace from July through December, half the gain in the first half of the year, a Bloomberg News survey showed. The dollar is trading near a 5 1/2-month high against the euro, reducing the need for commodities as a hedge against inflation. China, the second-largest oil consumer, said yesterday imports fell in July.

Crude oil for September delivery fell as much as $1.16, or 1 percent, to $113.29 a barrel, in after-hours electronic trading on the New York Mercantile Exchange. It was at $113.42 a barrel at 2:11 p.m. Singapore time.

Yesterday, futures fell 75 cents, or 0.7 percent, to settle at $114.45 a barrel, the lowest close since May 1. Oil has declined 23 percent from the record $147.27 reached on July 11.

Prices are also down as the dollar gained on speculation the economic slowdown that started in the U.S. is spreading. The dollar traded at $1.4872 against the euro at 10:23 a.m. in Tokyo from $1.4909 yesterday.

Hedge funds and other speculators increasing their net- short positions in futures contracts have also spurred crude oil's decline, said Jonathan Kornafel, director for Asia at Hudson Capital Energy in Singapore.

Speculative short positions, or bets that prices will fall, outnumbered long positions by 5,550 contracts on the New York Mercantile Exchange in the week ended Aug. 5, the Commodity Futures Trading Commission said in its Commitments of Traders report on Aug. 8. Net-short positions rose by 4,890 contracts, or 741 percent, from a week earlier.

China's July crude-oil imports fell 7 percent from a year earlier after global prices increased to a record, discouraging refiners from purchasing raw material to process into fuels. The country's 15 biggest oil refineries increased their operating rates to boost fuel supplies for the Beijing Summer Olympic Games that started on Aug. 8.

Prices rose in early trading yesterday as five days of clashes between Russia and Georgia threatened alternative export routes from Azerbaijan, needed because of a pipeline fire.

A fire on the Turkish stretch of the Baku-Tbilisi-Ceyhan pipeline was extinguished yesterday following an explosion last week. Georgia is a key link in a U.S.-backed southern energy corridor that connects the Caspian Sea region with world markets, bypassing Russia. The Baku-Tbilisi-Ceyhan pipeline ships Azeri Light crude.

Brent crude oil for September settlement fell as much as $1.29, or 1.1 percent, to $111.38 a barrel on London's ICE Futures Europe exchange. It was at $111.46 a barrel at 2:12 p.m. Singapore time. It declined 66 cents, or 0.6 percent, to settle at $112.67 a barrel yesterday, the lowest close since May 1.