July 16 (Bloomberg) -- Crude oil was little changed below $139 a barrel in New York after tumbling more than $6 yesterday because of concern a slower U.S. economy will curtail demand.
Prices dropped as Federal Reserve Chairman Ben S. Bernanke said risks to growth and inflation have risen, in testimony to the Senate Banking Committee. He abandoned a June assessment that the threat of an economic slowdown had diminished.
``We're getting to the point where the market's looking at an increasing likelihood of a deep recession,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
Crude oil for August delivery rose 2 cents to $138.76 a barrel at 8:33 a.m. Sydney time in after-hours electronic trading on the New York Mercantile Exchange. Futures reached a record $147.27 a barrel on July 11 and have risen 87 percent in the past year.
Oil fell $6.44, or 4.4 percent, to settle at $138.74 a barrel yesterday. It was the biggest percentage drop since March and the largest dollar decline since Jan. 17, 1991, when futures closed at $21.44. Oil fell as much as $9.26 to $135.92 a barrel.
``When it traded below $140, a big wave of selling hit,'' said Addison Armstrong, director of market research at TFS Energy LLS in Stamford, Connecticut. ``The market was trading a little bit above $140, and when it traded below, it fell something like $2 in a minute. Nothing seemed to hold it.''
Gasoline Demand
U.S. gasoline demand dropped 5.2 percent last week, the 12th consecutive weekly decline, a sign record pump prices are changing driving habits, a MasterCard Inc. report showed yesterday. Gasoline futures fell 17.29 cents, or 4.9 percent, to $3.3848 a gallon yesterday in New York. They were unchanged at 8:07 a.m. in Sydney.
The profit margin, or crack spread, for making three barrels of crude into one of heating oil and two of gasoline, reached its lowest since March 19 yesterday, based on futures prices. The crack spread fell 40.32 cents to $10.9410 a barrel.
The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world's oil, said it expects demand for its members' crude will fall in 2009 as the global economy slows. Demand for OPEC crude next year will average 31.2 million barrels a day, a drop of 710,000 barrels a day from the forecast for 2008, the group said in its monthly oil market report yesterday.
``The whole U.S. economic scene is sort of being questioned and obviously that would say something about the demand for oil,'' said Paul Tossetti, director of oil market analysis at PFC Energy in Washington.
Brazilian Strike
Also pressuring prices, Petroleo Brasileiro SA, Brazil's state-controlled oil company known as Petrobras, said it resumed normal crude production at the Campos Basin after a strike that began July 14.
Royal Dutch Shell Plc, Europe's biggest oil company, ended a force majeure on exports of Nigerian Bonny Light crude. Force majeure is a legal clause that allows producers to miss deliveries because of circumstances beyond their control. The clause was imposed after attacks on a crude-oil installation in May. The Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility.
Brent crude oil for August settlement fell $5.17, or 3.6 percent, yesterday to $138.75 a barrel on London's ICE Futures Europe exchange, after touching $134.96 a barrel. The August contract, which expires today, reached a record $147.50 on July 11. The more widely held September contract dropped $5.47, or 3.8 percent, yesterday to $139.86 a barrel. It touched $136.20.
Lower Inventories
``It's time for everyone to reassess where this market is headed and whether the try for $150 is worth the risk,'' Tim Evans, an energy analyst for Citi Futures Perspective in New York, said in an e-mail yesterday. ``Today's answer is no!''
U.S. oil supplies probably fell last week as record prices discouraged buying by refiners. Supplies probably declined 2.2 million barrels in the week ended July 11 from 293.9 million the week before, according to the median of 10 responses by analysts surveyed before an Energy Department report at 10:35 a.m. Washington time today.
Gasoline stockpiles probably lost 100,000 barrels from 211.8 million barrels the week before, the survey showed. Distillate fuel, including heating oil and diesel, probably rose 2 million barrels from 122.5 million barrels the week before.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net
Last Updated: July 15, 2008 18:35 EDT
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