Crude Oil Futures Decline to Six-Week Low ; Sharp Rise in Prices Weakening Global Demand

WASHINGTON – Crude oil and gasoline plunged to the lowest level in six weeks on signs that record fuel prices are slowing growth in global energy demand.

“Signs of weaker demand are hanging over the market,” said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. “There has been a tremendous rise in prices over the past year, which had to have an effect.”

OPEC reduced its forecast for oil demand for a fifth straight month in a report this week. The U.S. Energy Department and International Energy Agency have also cut their demand estimates this month. IEA said this week that it wouldn’t release more stockpiles to fill gaps caused by Hurricane Katrina after an auction of U.S. oil reserves met weak demand.

Crude oil for October delivery fell $1.75, or 2.7 percent, to $63 a barrel on the New York Mercantile Exchange, the lowest close since Aug. 5. Futures have declined 11 percent since touching a record $70.85 a barrel on Aug. 30. Prices, which fell 1.7 percent this week, are 44 percent higher than a year ago.

“I’m looking at $55, most likely before Halloween,” said Bill O’Grady, assistant director of market analysis at A.G. Edwards & Sons in St. Louis. “This is a weak demand period anyway. The rebuilding after Katrina may be an economic stimulus in the long term but won’t be felt for months. Finally, high energy prices are beginning to cause a global slowdown.”

Gasoline for October delivery fell 11.36 cents, or 6 percent, to $1.7851 a gallon, the lowest since Aug. 3. Futures have declined 39 percent since reaching a record $2.92 a gallon on Aug. 31. Prices are 46 percent higher than a year ago.

Demand for gasoline declined 4.3 percent to 8.6 million barrels a day last week, the U.S. Energy Department said. The fall coincided with the Labor Day holiday, when vacationers usually take to the highways. Gasoline consumption peaks during the driving season, which runs from Memorial Day to Labor Day.

Gasoline demand has fallen with the end of the driving season, said Jeff Lenard, spokesman for the National Association of Convenience Stores. “We’re also hearing there is a reduction of demand beyond what we normally see in September,” he said.

Regular-grade gasoline, averaged nationwide, fell 2.8 cents to $2.887 a gallon Thursday, according to data released Friday by AAA, the nation’s largest motoring organization. Prices have declined 5.6 percent since hitting a record $3.057 on Sept. 2. Pump prices are 57 percent higher than a year ago.

The Energy Department said it sold 11 million barrels of crude oil from the Strategic Petroleum Reserve out of the 30 million barrels offered. The other 25 members of the IEA agreed to make an additional 30 million barrels of crude oil and petroleum products available.