Oil price falls on gloomy outlook

OIL FALLS: Crude prices fall more than $2 on Friday. (Getty Images)

Oil prices fell more than $2 on Friday as flagging demand in the United States and other consumer nations extended crude's losses to 8 percent this week.

US crude traded down $2.15 to $105.74 a barrel by 14:49 GMT after settling on Thursday at the lowest level since April 4. London Brent crude fell $2.35 to $103.95.

Slowing demand in the United States due to high fuel costs and wider economic problems has sent crude down from record highs over $147 a barrel in July, overshadowing US government data released on Thursday showing an unexpected drop in crude stocks in the world's top consumer.

Most of the US Gulf of Mexico production shutdowns related to Hurricane Gustav are expected to be reflected in next week's inventory data.

Energy companies have been slowly bringing back shut-in oil and natural gas production and 11 refineries remained closed on Thursday following Gustav, but early inspections showed little damage to installations.

Traders were also keeping an eye on Hurricane Ike, which is expected to reach the Bahamas early next week and South Florida by mid-week.

Surging oil demand in emerging economies like China had supported a six-year record rally, with additional strength coming from a rush of cash from investors seeking to hedge against inflation and the weak dollar.

Gains in the greenback over the past two months have helped push oil down, with the dollar hitting an 11-month high against the euro early Friday. The dollar later fell after a government report showed the US economy lost more jobs than expected last month and the unemployment rate jumped.

"Overall, the dollar has been stronger than it has ever been and right now overall demand is starting to effect the bulls," said Kyle Cooper, director of research for IAF Advisors.

"The economy in the US and Europe are turning bad and people realize that the growth in the economies of China, India and Brazil will not be enough to offset what looks like a world economic contraction."

Additional weakness came on news China, the world's second largest oil consumer, will slash fuel imports to nearly nothing this month after record-high purchases that filled domestic stocks just ahead of the Olympics.

Traders were also awaiting OPEC's next meeting on September 9, with some expectations the group will trim supplies unofficially while leaving public output targets unchanged.

Iran's OPEC governor said an oil price of $100 per barrel was "appropriate" in current conditions, the Oil Ministry's news agency Shana reported on Friday. (Reuters)

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