Oil drops again as U.S. pump prices slip to near $4
Light, sweet crude for September delivery fell $1.60 to $123.89 a barrel in on the New York Mercantile Exchange. Earlier the contract dropped as far as $122.50, its lowest point since June 5.
In another sign that Americans continue to struggle with soaring energy prices, filling station operators hungry for business ratcheted down the average price for a gallon of regular by 2 cents, according to auto club AAA, the Oil Price Information Service and Wright Express.
AAA spokesman Geoff Sundstrom said such a large decline indicates a deteriorating demand by the world's thirstiest oil consumer. Retail prices have fallen about a dime per gallon in just the past week.
"People say typically prices shoot up like a rocket, fall like a feather. But this time ... it looks like it's different," Sundstrom said. "The retail sector is interested in bringing these prices down as fast as they can to stimulate business in their convenience stores."
Sundstrom said prices at the pump should slip below the $4 mark over the weekend and could drop by at least another 25 cents by Labor Day, if oil stays on its downward path.
"We're seeing a historic change in driving habits," he said, although he added that "we still have a long way to go before we get back to the comfort zone, if you will, for the consumer."
Oil traders managed to post a gain of $1.05 a barrel Thursday, but analysts say the market's momentum points to further declines. Crude has fallen in six of the past eight sessions, and is trading more than 15 percent below its peak above $147 a barrel earlier this month.
By afternoon Friday, crude was down nearly 16 percent from its peak above $147 a barrel two weeks earlier. Still, prices remained about 65 percent higher than they were this time last year.
"There's just nothing sufficiently bullish coming into the market right now to sustain a rally," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "We're just seeing a new theme in which demand has become a very important part of the equation."
Threats to supply, which traders have fretted over for months, remain.
The abduction of five crew members from a Swedish boat in Nigeria's oil-producing Niger delta region highlighted the risks to supply in the African nation, a major supplier to the U.S. Earlier in the week, Nigerian militants threatened to blow up pipelines in the region within a month.
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