Oil down below $122

The Associated Press   |  Wed, 07/30/2008 8:21 PM  |  Business

Oil prices were slightly lower Wednesday, below US$122 a barrel, after sliding overnight on expectations that this year's surge in energy costs is undermining U.S. gasoline demand.

By midday in Europe, light, sweet crude for September delivery had shed 51 cents to US$121.68 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped US$2.54 to settle at US$122.19 a barrel on Tuesday.

In London, September Brent crude was down 42 cents at US$122.29 a barrel on the ICE Futures exchange.

Investors expect more evidence of falling gasoline consumption when the U.S. Energy Department's Energy Information Administration releases its weekly oil inventory report later Wednesday, said Mark Pervan, a senior commodities strategist with ANZ Bank in Melbourne.

"People are looking closely at the deteriorating demand for petrol," Pervan said. "The market will probably fence-sit ... ahead of the DOE numbers."

Gasoline stocks were expected to rise 400,000 barrels in the petroleum supply report, according to the average of analysts' estimates in a survey by energy research firm Platts. The survey also showed that analysts projected crude oil inventories to fall 1.3 million barrels.

Crude futures have sharply fallen over the past 19 days. The price of oil has dropped in seven of the last 10 sessions, and is down about 17 percent from its peak above US$147 a barrel earlier this month. Prices remain about 60 percent higher than at this time last year.

Comments from OPEC President Chakib Khelil indicating that he did not see a need for the oil cartel to cut production if prices continued to fall were also accentuating the bearish sentiment, according to analysts at JBC Energy in Vienna, Austria.

Lending some support to oil prices was Tuesday's announcement from Royal Dutch Shell PLC that it may not be able to fulfill some oil-export contracts after Nigerian militants sabotaged a pipeline in the Niger Delta.

Militant attacks on Nigerian oil facilities have trimmed nearly one quarter of the country's regular daily output.

The strongest Nigerian militant group, the Movement for the Emancipation of the Niger Delta, said it sabotaged two pipelines early Monday in the southern oil-producing region.

Nigerian media reported the main pipeline normally carries about 130,000 barrels per day of crude oil from wells to export terminals.

Shell didn't specify how much oil production was cut by the militant attack or how long repairs would take. Shell said its so-called "force majeure" announcement covers three months of supply contracts from the affected pipeline, but didn't specify how much oil that covered. Mo

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