Oil falls $2 to 5-month low on economic gloom
Reuters* Dealers focus on soft oil demand, shrug Gustav impact
* Traders await OPEC's decision next week
* China slows fuel imports after Olympics (Updates prices with settlements)
By Matthew Robinson
LONDON (Reuters) - Oil prices fell to a freshfive-month low Friday on flagging demand in the UnitedStates and other consumer nations, extending crude's losses to8 percent this week.
The market shrugged off continued production problems inthe United States in the wake of Hurricane Gustav, which leftsome 23 percent of the nation's crude production and 6 percentof its refining idled and in slow recovery.
"The economy in the United States and Europe is turning badand people realize that the growth in the economies of China,India and Brazil will not be enough to offset what looks like aworld economic contraction," said Kyle Cooper, director ofresearch at IAF Advisors in Houston.
U.S. crude traded down $1.66 to settle at $106.23 abarrel, the lowest level since April 4. London Brent crudefell $2.21 to $104.09.
U.S. oil demand over the past four weeks has been runningabout 3.5 percent below a year ago and gasoline consumptionappears on track for its first annual decline since the early1980s, according to data from the U.S. Energy InformationAdministration.
Further fueling worries about the economy, U.S. dataFriday showed the unemployment rate rising to 6.1 percent, thehighest level in nearly five years, as the country suffers froma banking crisis.
Oil prices have been on a steep downtrend since hitting arecord over $147 a barrel in mid-July, raising the possibilitythat OPEC will cut production when it meets next week in Viennato stem the slide.
Iran's OPEC governor said an oil price of $100 per barrelwas "appropriate" in current conditions, the Oil Ministry'snews agency Shana reported Friday.
Dealers said mounting evidence of slowing global energydemand outweighed continued production problems in the Gulf ofMexico and along the U.S. Gulf Coast after Hurricane Gustav,which is expected to trigger deep declines in commercialinventories in the coming weeks.
Shutdowns caused by the storm have already cut a cumulativetotal 8.6 million barrels of crude oil production, theequivalent of over a third of U.S. daily consumption. Butonshore demand for crude has also dipped due to refineryoutages, mitigating the impact of the offshore outages.
Energy companies have been bringing production back on lineand have reported no major damage from the storm, but expertsexpect a full recovery could be slow as another storm,Hurricane Ike, threatens to hit the region next week.
Surging oil demand in emerging economies like China hadsupported a six-year record rally, with additional strengthcoming from a rush of cash from investors seeking to hedgeagainst inflation and the weak dollar.
But China, the world's second largest oil consumer, isexpected to slash fuel imports to nearly nothing this monthafter record-high purchases that filled domestic stocks justahead of the Olympics.
Gains in the greenback over the past two months have alsohelped push oil down, with the dollar briefly hitting an11-month high against the euro early Friday. (Additional reporting by Gene Ramos in New York and FelicityLoo in Singapore; Editing by Christian Wiessner)