OiL PRICES: Bleak economic news sends crude down to $91.90

Oil futures dropped sharply today as a dismal retail sales report confirmed a growing view among investors that the economy is slowing and that demand for energy is likely to fall.

Investors who have already been selling heavily on concerns about a weak economy dumped contracts again after the Commerce Department said retail sales fell by 0.4 percent in December. Not only was the drop much worse than the 0.1 percent analysts expected, it also was evidence that not even the holiday shopping season could encourage wary consumers to spend freely.

Light, sweet crude for February delivery fell $2.30 to settle at $91.90 a barrel on the New York Mercantile Exchange.

President Bush contributed to the concerns by warning that soaring oil prices could cause an economic slowdown in the United States.

"High energy prices can damage consuming economies," Bush said in Riyadh, Saudi Arabia, before meeting with that country's King Abdullah.

Bush made his comments as part of a plea to OPEC to boost production to bring oil prices down. The market shrugged off Saudi Oil Minister Ali Naimi's response that supplies are adequate.

"The overall tone of the market here is just reflecting a lot of the demand uncertainty out there," said Tim Evans, an analyst at Citigroup Inc.

Expectations that the Energy Department's weekly inventory report will show supplies of crude oil and refined products rose last week also weighed on futures prices.

At the pump, meanwhile, gas prices fell 0.9 cent overnight to a national average of $3.061 a gallon, according to AAA and the Oil Price Information Service. Gas prices have fallen lately after following oil prices' rise to a record $100.09 a barrel two weeks ago. But retail gas prices remain nearly 83 cents higher than they were one year ago.

There have been several signs lately that high prices are crimping gasoline demand. In recent weeks, gasoline demand growth has slowed as low as 0.1 percent at times, well below the 1.5 percent growth most analysts consider healthy.

High prices may also be cutting demand for crude oil. On Wednesday, the International Energy Agency will release its monthly oil market report, and Evans expects the IEA, an advisory group to mostly Western industrialized nations, to cut oil demand growth predictions.

Other energy futures also fell today. February heating oil futures fell 4.2 cents to settle at $2.5472 a gallon while February gasoline futures dropped 6.36 cents to settle at $2.3092 a gallon. February natural gas futures fell 15.7 cents to settle at $8.196 per 1,000 cubic feet.

In London, Brent crude futures fell $1.94 to settle at $90.98 a barrel on the ICE Futures exchange.

Via: Associated Press

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