This is interesting
VIENNA, Austria (AP) -- Oil prices fell below $127 a barrel Wednesday, extending a decline of more than $3 in the previous session on a growing sense that record-high costs have cut demand for gasoline and other fuel.
The summer driving season in the U.S. began with the just-ended Memorial Day weekend, and some analysts are predicting that data will show a lackluster start.
U.S. Energy Department data covering the weekend won't be released until next week. But even ahead of those figures, other statistics indicated Americans are driving less because of bloated prices at the pump.
The Schork Report, edited by Stephen Schork, cited the latest statistics from the Federal Highway Administration, noting that "estimated vehicle miles traveled ... on all U.S. public roads for March 2008 fell 4.3%, or 11 billion miles, compared with March 2007.
"In fact, this is the first time estimated March travel fell since 1979 and the largest year-on-year drop in the history of the report, which dates back to 1942," said the newsletter.
Sweet crude for July delivery was down $2.45 at $126.40 a barrel in electronic trade on the New York Mercantile Exchange by afternoon in Europe. The contract fell $3.34 to settle at $128.85 a barrel Tuesday, the first day of trade after the Memorial Day holiday.
The front-month contract is now close to $9 off its all-time peak of $135.09 a barrel, hit last Thursday.
U.S. gasoline demand slumping
Analysts said early indications suggest Americans are spending less time on the road.
"It definitely was lower than [previous] Memorial Day weekends," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service.
In a research note, Edward Meir, an analyst at MF Global UK Ltd. said if trends continue "we could be heading for the first annual drop in gasoline consumption in some 17 years."
The United States is the world's largest energy consumer and fluctuations in consumer demand can impact international oil prices.
Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Mass., thinks energy investors are selling on recent data suggesting Americans are driving less. That includes the weekly Energy Department reports that show gasoline demand is falling, and the Federal Highway Administration data.
Oil prices were also pressured by the dollar, which gained ground against the yen and euro. Investors who buy commodities such as oil as a hedge against inflation when the dollar falls tend to sell when the greenback strengthens. Also, a rising dollar makes oil more expensive to overseas investors.
Investors shrugged off a number of events that could have sent oil prices higher, including news that crude oil production in Mexico fell 13% in April compared with the previous year, the temporary shutdown of a North Sea oil platform and the latest in a spate of oil-pipeline bombings in Nigeria.
Investors also ignored continued strength in heating oil futures, which have over the last month helped send crude oil smashing through a string of new record highs. Distillate supplies worldwide are seen as strained due to strong demand for diesel from Europe and Asia.
In other Nymex trading, June heating oil futures fell nearly 4 cents to $3.7601 a gallon, while gasoline futures slipped by more than 2 cents to $3.3592 a gallon. Natural gas futures fell by just over 8 cents to $11.7190 per 1,000 cubic feet.
July Brent crude fell $2.12 to $126.17 a barrel on the ICE Futures exchange in London.
