Oil Prices Still Falling on Declining Demand

Singapore, Aug. 5, 2008--Oil prices fell to near $120 a barrel Tuesday in Asia on expectations the economic downturn in the U.S. will erode consumer demand for crude products.

"The main factor weighing on oil prices is worries about oil consumption being weakened, especially in the U.S.," said David Moore, a commodity strategist with Commonwealth Bank of Australia in Sydney.

Light, sweet crude for September delivery fell 93 cents to $120.48 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract dropped $3.69 overnight to settle at $121.41 a barrel.

On Monday, the Commerce Department said consumer spending after adjusting for inflation fell 0.2 percent in June — the biggest drop since February — as shoppers dealt with higher prices for gasoline, food and other items. The weak consumer spending data came despite the arrival of tax rebate checks, part of a stimulus package the government hoped would spur purchasing.

Oil prices also fell as Tropical Storm Edouard seemed less likely to disrupt oil and natural gas output in the Gulf of Mexico.

In London, September Brent crude was down $1.11 at $119.57 a barrel on the ICE Futures exchange.

Investors ignored continued tension over Iran's nuclear program. Representatives of the five permanent members of the U.N. Security Council and Germany agreed Monday to seek new sanctions against Iran after the country failed to meet a weekend deadline to respond to an offer intended to defuse the dispute, State Department spokesman Gonzalo Gallegos said.