Oil Prices Settle Below $115 on Drop in China Demand
Oil prices fell on Monday as a drop in crude imports by No. 2 consumer China outweighed concerns over supply disruptions stemming from the conflict between Russia and Georgia.
U.S. light sweet crude settled down 75 cents at $114.45 a barrel, after touching a low of $112.72, extending losses that have dragged oil off a record high above $147 a barrel hit on July 11.
London Brent crude fell 66 cents to $112.67.
China's crude imports unexpectedly fell 7 percent in July to a seven-month low in the steepest monthly drop since January 2005, as refiners balked at soaring crude costs amid lagging domestic fuel prices.
The drop in Chinese imports added to wider concerns about demand. Consumption in the United States and other developed economies has fallen due to high fuel prices.
"I think that sentiment is changing on China -- that it [demand] might not grow at the same rate that it has in the past couple of years -- and the figures from this morning attest to that," said Lehman Brothers oil analyst James Crandell.
Rising demand from China and other developing economies sent oil on a six-year rally that drove prices up sevenfold to their peak in July. Additional buying support this year came from investors buying oil to hedge against inflation and the weak dollar.
The dollar has been rallying against the euro since last week as investors have reassessed the effect of the U.S. economic slowdown on the rest of the world.
Georgia appealed for international intervention on Monday, and pulled its battered forces back to defend the capital, as Russian troops moved farther into its territory, ignoring Western pleas to halt.
Oil traders have pushed prices down despite the potential for the conflict to disrupt key transportation links for Caspian Sea oil producers, including Azerbaijan and Kazakhstan.
Georgia's oil ports of Supsa and Batumi, which export Azeri crude, have reduced shipments while the Georgian port of Poti has been shut. Kazakhstan also stopped shipments of its crude from Batumi.
The cutbacks come after a fire in eastern Turkey on the Baku-Tblisi-Ceyhan pipeline last week halted loadings of Azeri Light crude shipped to the Turkish port of Ceyhan.
The blaze was extinguished on Monday and repairs may take one to two weeks, or longer, a source at the pipeline consortium said, forcing BP Plc to cut output by at least 400,000 barrels a day at the Azeri-Chirag Gunashli oil fields.
OPEC President Chakib Khelil, speaking on a visit to Iran, urged members of the oil exporters' group to stick to agreed targets on output.
OPEC is overshooting its informal output target, with Saudi Arabia leading the way after the kingdom pledged to meet rising demand and help tame runaway oil prices. The producer group meets on Sept. 9 to decide on future output policy.
A Reuters poll of analysts ahead of weekly U.S. inventory data due out on Wednesday forecast a 100,000-barrel draw in crude stocks, a 2.1-million-barrel draw in gasoline inventories, and a 1.7-million-barrel build in distillates.