Oil Falls a Third Day as Economic Slowdown May Cut U.S. Demand

Crude oil fell for a third day on signs that the slowing U.S. economy will cut fuel demand in the world's biggest energy consuming country.

Oil is likely to slide further this spring as lower economic growth encourages traders to exit commodity markets, Goldman Sachs Group Inc. said in a report on March 20. A government report on March 19 showed that U.S. fuel demand in the four previous weeks was down 3.2 percent from a year earlier.

``We can look forward to a continuation of the commodity downtrend we saw last week,'' said Eric Wittenauer, an energy analyst at Wachovia Securities in St. Louis. ``The economic slowdown and concern about demand are pushing prices lower.''

Crude oil for May delivery fell 98 cents, or 1 percent, to settle at $100.86 a barrel at 2:55 p.m. on the New York Mercantile Exchange. It was the lowest close for a front-month contract since March 4. Oil is up 62 percent from a year ago.

The May contract fell $6.90, or 6.3 percent, last week, the first decline in seven weeks. Futures prices rose to $111.80 a barrel on March 17, the highest since trading began in 1983.

``We might consolidate here for a bit because of the strong drop last week,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``We will then probably continue the move lower.''

U.S. crude-oil inventories probably rose 1.5 million barrels from 311.8 million barrels last week, according to the median of responses in a Bloomberg News survey. It would be the 10th gain in 11 weeks.

Saudi Statement

Saudi Arabia, the world's biggest oil exporter, said it will ensure international markets are adequately supplied with crude oil to support the continued growth of the global economy.

The Supreme Council of Petroleum and Mineral Affairs, chaired by King Abdullah, agreed to work with the Organization of Petroleum Exporting Countries and non-OPEC countries to ensure oil-market stability and ``prevent the effects of harmful speculation,'' the government body said in a statement posted late yesterday on the Web site of the state news agency.

The meeting was held one day after U.S. Vice President Dick Cheney met with the Saudi king. Cheney declined to say whether he asked the Saudis to produce more oil to calm oil prices.

Brent crude for May settlement fell 52 cents, or 0.5 percent, to close at $99.86 a barrel on London's ICE Futures Europe exchange. It was the first time Brent settled below $100 a barrel since March 4. Futures surged to a record $107.97 a barrel on March 17.

Exchanges in New York and London were closed on March 21 for the Good Friday holiday.

Gasoline Rally

Gasoline for April delivery rose 3.61 cents, or 1.4 percent, to close at $2.6412 a gallon in New York. Futures touched $2.7435 on March 11, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005. Futures fell during the past two weeks.

``Gasoline is holding its own because of the down unit at Lyondell,'' said Tom Bentz, a broker at BNP Paribas in New York. ``The gasoline market has also been beaten up so much it was time for it to rally.''

LyondellBasell Industries, a unit of Access Industries Holdings LLC, said on March 21 that it reduced production at its Houston refinery to perform maintenance work. The company will idle its fluid catalytic cracking unit until mid-April, causing an unspecified cut to production.

The plant has an oil-processing capacity of 268,000 barrels a day, Rotterdam-based LyondellBasell said.

Gasoline supplies probably dropped 1.55 million barrels last week, the Bloomberg survey showed.