OIL prices dropped below US$89 per barrel again yesterday as the latest government data showed Americans holding tighter to their wallets.
Americans spent less on autos, clothing and furniture last month, according to a report from the Commerce Department. Consumer spending is a huge driver for the US economy, and while more is being spent on gas because of higher prices, demand is actually falling.
Commerce reported that retail sales were flat in August. That was a surprise, given a slew of private market reports from auto dealers and retailers that sales rose last month.
Benchmark West Texas Intermediate crude gave up US$1.30 to finish the day at US$88.91 per barrel in New York while Brent crude lost 12 cents to end at US$109.65 in London.
Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said consumer spending probably will erode further this year. Gasoline prices, which hit US$3.634 per gallon overnight, are 91.7 cents higher than a year ago. So far, motorists have spent about US$491 billion on gasoline in 2011, Kloza said.
"That's a bunch," he said. "Consumers are still in a very conservative, fragile mood."
Yet the Energy Information Administration said yesterday that wholesale gasoline demand in the US dropped 2.7 percent last week. That mirrors private surveys that show a sustained drop in how much retail gasoline is being bought.
Petroleum demand isn't just falling in the US Other industrialized parts of the world, especially Europe, are pulling back on fuel consumption amid a stagnant global economy.
Independent oil analyst Jim Ritterbusch said that Europe's debt problems aren't going away.
"Oil consumption will be falling short of most expectations during the coming months," Ritterbusch said.
As expected yesterday, government data showed that Tropical Storm Lee took a considerable bite out of US oil supplies. The storm temporarily shut down oil production in the Gulf of Mexico.
Gasoline supplies, however, rose more than analysts had expected and prices dipped.
In other commodities trading, heating oil fell added less than a penny to end at US$2.945 per gallon and gasoline futures dropped 1.66 cents to finish at US$2.7258 per gallon. Natural gas added 5.9 cents to end at US$4.039 per 1,000 cubic feet.
Source:shanghaidaily