Oil prices have hit a two month low as demand continues to fall.
The price of oil fell to its lowest level in two months on Wednesday as evidence builds that the high cost of gasoline and other fuels is sapping demand.
New data from the Energy Department show that fuel consumption over the past month declined by almost 3 percent compared with last year. Analysts attributed the trend to soaring pump prices and a slowdown in economic activity, particularly among Gulf Coast states that were affected by Hurricanes Katrina and Rita.
“Maybe there is some elasticity to petroleum demand after all,” said analyst Andrew Lebow of Man Financial Inc. in New York. The decline in oil prices coincided with an even more pronounced selloff of gasoline futures, which Lebow attributed in part to momentum trading.
It is too soon to tell whether the dropoff in demand will hold or was a short-term phenomenon, analysts said. But it definitely has the market’s attention for the moment, overshadowing government data that show crude oil and gasoline supplies are shrinking.
I’m not sure if this is a sign of a crashing oil market, but it certainly puts into perspective those predictions of $ 100 per barrel oil we were hearing in August.
