Oil falls to near $82 per barrel on weak US crude demand

Oil prices fell slightly from a three-month high above $82 a barrel Wednesday in Asia after a report showed U.S. crude inventories fell less than expected last week, suggesting demand in the U.S. remains sluggish.

Benchmark crude for September delivery was down 38 cents to $82.17 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract gained $1.21 to settle at $82.55 on Tuesday, the highest since May 4.

U.S. crude inventories fell by 776,000 barrels last week, according to the American Petroleum Institute. That was less than a drop of 1.2 million barrels that analysts expected, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Supplies of gasoline and distillates rose, the API said.

The Energy Department’s Energy Information Administration is scheduled to report its inventory data on Wednesday.

Analysts point to surging oil demand in developing economies, especially China, as more than offsetting a tepid recovery in the U.S. and Europe.

“The underlying fact is the emerging markets are still growing and so is their consumption of energy,” Sander Capital said in a report.

Oil broke above $80 this week as the euro rose to a three-month high against the dollar. The euro fell slightly to $1.3216 on Wednesday from $1.3222 on Tuesday while the dollar fell to an eight-month low of 85.38 yen from 85.80 yen.

If oil prices continue to rally, it could undermine consumer demand in the U.S. and jeopardize the fragile economic recovery. Oil soared to $147 a barrel in July 2008 before plummeting to $32 in December amid a global financial crisis and recession.

“The scary thought is what happens if oil hits $86 and keeps going,” Sander Capital said. “The U.S. economy cannot take oil at $100 a barrel again.

In other Nymex trading in September contracts, heating oil fell 0.84 cent to $2.1916 a gallon, gasoline skidded 1.12 cents to $2.1823 a gallon and natural gas rose 2.2 cents to 4.730 per 1,000 cubic feet.

Brent crude was down 30 cents to $82.35 a barrel on the ICE futures exchange.

Source: AP