UPDATE: Oil investors try to start rally but fail
A barrel of light, sweet crude rose $1.05 Thursday to settle at $125.49 on the New York Mercantile Exchange.
By ADAM SCHRECK
The Associated Press
7/24/2008
NEW YORK — Oil market investors tried but failed to start a rally in crude Thursday, leaving prices hovering right at $125 a barrel after an earlier move higher. At the gas pump, prices continued their retreat.
Stocks rose sharply the past two sessions as the price of oil continued its decline. The price is now down more than $20 after just weeks ago hitting a record above $147 a barrel. A barrel of light, sweet crude rose $1.05 Thursday to settle at $125.49 on the New York Mercantile Exchange.
Meanwhile, the national average for a gallon of regular dropped more than a penny and a half to $4.026 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Retail diesel is down nearly half a cent to $4.788.
Falling prices at the filling station reflect the concern of many energy traders that the weakening U.S. economy is hurting demand. Analysts say that is helping keep oil prices from racing back higher.
Light, sweet crude for September delivery rose 6 cents at $124.50 a barrel on the New York Mercantile Exchange.
The day's gains followed a sharp drop on Wednesday, when oil tumbled $3.98 to settle at $124.44 a barrel, its lowest finish since June 4. Crude has settled lower in six of the previous seven sessions, and is now trading nearly 15 percent below its peak above $147 a barrel earlier this month.
In overnight trading, oil rose as high as $126.01 as some investors tried to see if the market had reached a bottom and could rebound. But the gains couldn't hold amid a growing belief that falling demand does not justify the fuel's recent high price.
Americans used 2.4 percent less fuel over the past four weeks than they did last year, the latest figures by the Energy Department's Energy Information Administration show. While that may not sound like much, industry experts say it represents a significant shift by the world's largest energy consumer. A bigger-than-expected increase in gasoline supplies only added to concerns that drivers are cutting back.
"The worries about demand erosion in the U.S. and an economic slowdown are really pulling prices down," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz Inc. in Singapore. "This is the summer driving season and so there's no question that the data shows demand destruction in the U.S."
While demand fears continued to hang over the market Thursday, modest declines in the dollar offered traders some reason to buy crude as a hedge against inflation and a softer greenback.
Investors remained on guard over a threat by Nigeria's main militant group Wednesday to destroy major pipelines in the oil exporting country within 30 days. The threat — which only weeks ago might have caused oil prices to spike — did little to push crude higher, however.
"We can only suggest that the market, finally weighed down by the specter of decreasing energy demand, may not be as responsive to geopolitical headlines as it once was," MF Global analyst Edward Meir wrote in a research note.
In other Nymex trading, heating oil futures rose 2.34 cents to $3.5735 a gallon while gasoline prices were nearly flat at $3.0349 a gallon. Natural gas futures dropped 3.92 cents to $9.396 per 1,000 cubic feet.
In London, Brent crude for September delivery rose 60 cents to $125.89 a barrel on the ICE Futures exchange in London.
Associated Press writer Gillian Wong in Singapore contributed to this report.