Oil prices drop amid worries about U.S. economy

Oil prices fell Tuesday amid worries about a possible slowdown in the U.S. economy that would reduce demand for oil and petroleum products.

Photo: Oil prices drop amid worries about U.S. economy

Light, sweet crude for December delivery lost 25 cents to US$85.77 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The contract fell 93 cents to settle at US$86.02 a barrel Monday.

November Nymex crude, which hit a record US$90.07 a barrel last week, settled on expiration Monday at US$87.56, down $1.04 from Friday's close.

The U.S. stock market's sharp downturn Friday has reignited concerns that the U.S. economy might be slowing, cutting demand for oil and petroleum products.

However, doubts about a possible cease-fire between Turkey and Kurdish rebels in Iraq helped crude oil pare some of its losses. Turkey has rejected such cease-fire declarations in the past, saying it will fight until all rebels surrender or are killed.

Turkish forces were seen moving toward the Iraq border Monday after an attack by Kurdish rebels left 12 soldiers dead and eight missing. Crude traders worry a Turkish incursion into Iraq would cut oil supplies from northern Iraq.

Analysts are beginning to debate whether last week's foray by crude above US$90 marked the peak of the bull market. Analysts are similarly split over whether the underlying supply and demand fundamentals justify such high prices.

Predictions about the future of oil prices range from US$60 to US$120, depending on whether the analyst believes oil supplies will tighten amid growing demand in the fourth quarter.

Many analysts think prices have risen sharply in recent weeks due only to speculative investing. Data released on Friday shows speculative buying of oil contracts increased last week. Other analysts argue fundamentals clearly support higher prices.

December Brent crude dropped 33 cents to US$82.94 a barrel on the ICE futures exchange in London.

Heating oil futures lost 0.34 cent to US$2.3075 a gallon (3.8 liters) while gasoline prices dropped 1 cent to US$2.1234 a gallon.

Natural gas added 3.9 cents to US$6.93 per 1,000 cubic feet. Natural gas prices are under pressure from unseasonably warm temperatures in the north and Midwest and a forecast that this winter will be warmer than normal.