Oil Falls on Speculation U.S. Consumption Decline Will Spread

By Mark Shenk

Aug. 14 (Bloomberg) -- Crude oil fell on speculation that fuel-consumption declines in the U.S. will spread to other countries as their economies slow.

U.S. gasoline demand was down 2.1 percent through July as record prices and slower economic growth cut consumer spending, an American Petroleum Institute report showed yesterday. Europe's economy contracted for the first time since the introduction of the euro almost a decade ago, a report showed today.

``The market is much more focused on demand destruction than on supply concerns,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The concern now is that the demand destruction in the U.S. will spread like a virus to other countries.''

Crude oil for September delivery fell 52 cents, or 0.5 percent, to $115.48 a barrel at 9:14 a.m. on the New York Mercantile Exchange. Prices are up 60 percent from a year ago.

Futures climbed $2.99 a barrel yesterday after an Energy Department report showed that U.S. gasoline supplies dropped 6.39 million barrels to 202.8 million barrels last week, the biggest decline since October 2002. Petroleum-product imports fell to the lowest since April 2005 and refinery operating rates were 1.1 percentage points lower, the report showed.

European gross domestic product fell 0.2 percent in the second quarter from the first, when it increased 0.7 percent, the European Union statistics office in Luxembourg said today.

Georgian officials said a Russian withdrawal stalled today as forces returned to the Black Sea port of Poti a day after U.S. President George W. Bush ordered a military-led humanitarian aid effort.

``People are trying to parse what's happening in Georgia,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``There are major pipelines running through the region, but it doesn't appear that they have been damaged during the conflict yet.''

Brent crude oil for September settlement rose 1 cent to $113.48 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.