Oil falls below $66 on worries of slow recovery

August 17, 2009 8:31:44 AM PDT
Oil prices fell below $66 a barrel Monday as investors worried that crude demand will recover only slowly in the U.S. and brushed off upbeat economic growth data from Japan. Benchmark crude for September delivery was down $1.63 to $65.88 a barrel by late morning in European electronic trading on the New York Mercantile Exchange. On Friday, the contract tumbled $3.01 to settle at $67.51.

Friday's big selloff was triggered by a sharp drop in the Reuters/University of Michigan consumer sentiment index, a bad sign for crude demand, which has already been sluggish this summer.

Oil also followed stock markets, which fell heavily in both Asia and Europe.

Japan's Nikkei 225 stock average dropped 3.1 percent, while Germany's DAX was down 1.8 percent.

"We've got overwhelmingly weak fundamentals in oil," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "The market has really been due for a correction."

Investors brushed off evidence that the global slump may be nearing an end. Japan said Monday that its economy grew an annualized 3.7 percent in the second quarter, breaking out of a yearlong recession.

"The worst of the recession may be over, but for most economies, especially the U.S., the recovery may still be quite slow," Shum said.

In other Nymex trading, gasoline for September delivery fell 1.7 cents to $1.92 a gallon and heating oil dropped 3.43 cents to $1.81. Natural gas for September delivery fell 7.5 cents to $3.16 per 1,000 cubic feet.

In London, Brent prices dropped $1.54 to $69.90 a barrel on the ICE Futures exchange.

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Associated Press writer Alex Kennedy in Singapore contributed to this report.

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