Oil Falls Amid Indications High Prices Will Cut Fuel Demand
By Mark Shenk
June 4 (Bloomberg) -- Crude oil fell amid indications that U.S. and Asian fuel consumption will drop because of increasing prices.
UAL Corp.'s United Airlines, the world's second-largest carrier, will reduce its fleet by about 100 planes to counter record jet-fuel costs. India, Malaysia, Indonesia, Taiwan, Sri Lanka and Thailand have cut subsidies and raised fuel costs, which is likely to curb fuel demand.
``You are starting to see consumers respond to these high prices,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``We are getting growing evidence that demand is taking a hit. I think we will test $120 before the week is over.''
Crude oil for July delivery fell 68 cents, or 0.6 percent, to $123.63 a barrel at 9:14 a.m. on the New York Mercantile Exchange, after earlier dropping to $123.15, the lowest since May 15. Futures reached a record $135.09 a barrel on May 22. Prices are up 87 percent from a year ago.
Brent crude oil for July settlement declined 80 cents, or 0.6 percent, to $123.78 a barrel on London's ICE Futures Europe exchange. The contract touched $123.03, the lowest since May 16. Prices reached a record $135.14 on May 22.
India's government raised retail prices of gasoline, diesel and cooking gas, Oil Minister Murli Deora told reporters today in New Delhi. The government previously increased fuel prices in February, the first time since June 2006. Cooking-gas prices had been capped since April 2005.
U.S. gasoline use fell 4.7 percent last week from a year earlier as motorists cut consumption, MasterCard Inc. said yesterday.
The Energy Department is expected to report that U.S. supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, rose last week, according to the median of 14 estimates in a Bloomberg News survey.
The department is scheduled to release its weekly report on inventories at 10:35 a.m. in Washington.