Oil steadied above $113 on Wednesday, after falling a day ago to its lowest since May 2 in the wake of official data showing US oil use in its steepest dive in 26 years.Oil demand in the world's top consumer fell by an average 800,000 barrels per day (bpd) on-year during the first half, marking the steepest fall since 1982, the Energy Information Administration (EIA) said.
US crude inched up 9 cents to $113.10 a barrel, more than $30 off the peak above $147 hit on July 11 as high fuel prices and economic problems hit demand worldwide.
Retail gasoline demand in the United States fell 3.8% last week versus a year ago, MasterCard Advisors said, even as pump prices eased from record highs.
“There's a swing in mood from supply concerns to falling demand particularly in the United States, but attention is beginning to turn to Europe and Asian economies as well,” said Mark Pervan, senior commodities analyst at ANZ Bank in Melbourne.
Growing demand from China and other emerging economies spurred oil on a six-year rally that sent prices up sevenfold at its peak, with additional support this year coming from investors buying oil as a hedge against the weak dollar and inflation.
But the situation has reversed, with high prices and weaker economies slowing demand for oil while the dollar is hovering near a six-month high against a basket of currencies.
Number two consumer China reported on Monday an unexpected 7% fall in July crude imports to a seven-month low, in the biggest monthly drop since January 2005 as refiners balked at soaring crude costs and lagging domestic fuel prices.
“All in all, we are maintaining a bearish trading posture in quest of additional price weakness to the $108 area, a level that appears achievable by week's end,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
Amid the gloomy outlook, traders will eye the weekly US inventory data due late on Wednesday.
A Reuters poll of analysts showed crude stocks likely fell by 200,000 barrels last week, gasoline stocks fell by 2.1 million barrels, and distillates rose by 1.9 million barrels.
The Russia-Georgia conflict remained supportive, albeit mostly taking a back seat so far this week.
Russian President Dmitry Medvedev had ordered a halt to military operations in Georgia on Tuesday, but Tbilisi said Moscow was still bombing towns and villages.
BP PLC closed an oil pipeline and a natural gas pipeline running from its Caspian Sea fields through Georgia but said neither pipeline had been damaged by the recent fighting.
The Western Route Export Pipeline (WREP), which takes crude from the Caspian port of Baku in Azerbaijan to the Georgian port of Supsa on the Black Sea, could have been carrying up to 155,000 bpd until the shutdown, trade sources said.
A third BP pipeline that runs through Georgia, the Baku-Tblisi-Ceyhan oil pipeline, was shut last week following an explosion in Turkey. (Reuters)