Business

Oil drops to lowest price in 3 months

Oil prices plunged to a three-month low Monday, briefly tumbling below $120 a barrel in another huge sell-off after Tropical Storm Edouard seemed less likely to disrupt oil and natural gas output in the Gulf of Mexico.

Crude's steep drop – prices fell more than $5 at one point during the day – dragged down other commodities from corn to copper and mimicked the big nosedives of the past three weeks, adding to growing beliefs that the oil bubble is running out of air.

Also weighing on prices Monday was a report by the Commerce Department that consumer spending after adjusting for inflation fell in June as shoppers dealt with higher prices for gasoline, food and other items. That fed investors' expectations that a U.S. economic slowdown is curbing U.S. demand for fossil fuels.

Light, sweet crude for September delivery fell $3.69, or 2.9 percent, to settle at $121.41 a barrel on the New York Mercantile Exchange. It was crude's lowest settlement price since May 5. Earlier, prices plummeted to $119.50, the lowest level since May 6. Crude has now fallen in six of the last nine sessions and has shaved 18 percent off its trading record of $147.27 reached July 11.

The dramatic dive came after traders learned that Edouard, aiming for the coasts of Texas and Louisiana, likely would not damage offshore oil and natural gas drilling platforms in the storm's path.

Still, oil market traders expressed surprise that a potential hurricane in the Gulf coupled with escalating tensions with Iran didn't send prices higher – almost a certainty just a few weeks ago.

“Any market that really doesn't respond to seemingly bullish news is often a tip-off that we're going lower,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

He and other analysts have predicted that, barring any surprises, crude could tilt toward $100 a barrel by the end of the year.

Meanwhile, retail gas prices kept falling, reflecting the continuing price-driven drop in U.S. fuel demand. A gallon of regular gas fell on average about half a penny overnight to $3.881.

Gas has fallen 5.6 percent since hitting an-all time high above $4 a gallon on July 17. But it so far hasn't kept up with oil's steep descent, suggesting that struggling filling stations are still saddled with gas bought when crude prices were higher.

  Comments