Crude Oil Falls as Concern Grows About U.S. Fuel-Demand Outlook

By Mark Shenk

Sept. 25 (Bloomberg) -- Crude oil fell for a third day on concern that U.S. fuel consumption will drop further because of risks to economic growth.

Oil fell as much as 2.4 percent after President George W. Bush's statement yesterday that the nation may ``slip into a financial panic'' if Congress doesn't pass a $700 billion bailout program. U.S. fuel demand averaged 19.5 million barrels a day during the past four weeks, the lowest since October 2003, the Energy Department said.

``I think concern about economic growth driving demand down is weighing on the market,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``Unfortunately, the end of the economic crisis isn't in sight. After being reassured that things were fine for the last year people are fatigued.''

Crude oil for November delivery fell $1.28, or 1.2 percent, to $104.45 a barrel at 9:02 a.m. on the New York Mercantile Exchange. Prices are down 29 percent from the record $147.27 a barrel reached on July 11.

Gasoline demand averaged 9 million barrels a day during the past four weeks, down 4.4 percent from the period last year, yesterday's report showed. Gasoline stockpiles dropped 5.9 million barrels to 178.7 million barrels, the lowest since 1967. Inventory levels prior to 1990 were reported on a monthly basis.

Stockpiles of crude fell 1.52 million barrels to 290.2 million in the week ended Sept. 19, the department said yesterday in its weekly report on supplies.

Durable Goods

Orders for U.S. durable goods fell more than twice as much as forecast in August, a sign that slower sales and tighter credit conditions prompted companies to cut spending. The 4.5 percent drop in bookings of goods meant to last several years followed a revised 0.8 percent gain in July that was smaller than previously reported, the Commerce Department said today.

Interruptions to supplies of crude and products increased today as Royal Dutch Shell Plc shut a gasoline-making unit at Europe's largest oil refinery, while in Nigeria, Chevron Corp. faces renewed strike action.

Shell shut the unit at its Pernis refinery in the Netherlands following a technical fault yesterday, company spokesman Wim van de Wiel said.

In Nigeria, a strike planned by Members of the National Union of Petroleum and Natural Gas Workers may disrupt exports from Chevron's Escravos terminal. The company produced 353,000 barrels of crude oil daily in Nigeria in 2007, according to its Web site.

Brent crude oil for November settlement declined $1.35, or 1.3 percent, to $101.10 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.