Bloomberg News 
Tuesday, July 15, 2008
July 15 (Bloomberg) — Crude oil tumbled 5 percent, the most in more than three years, amid concern that a slower U.S. economy will curtail demand for oil and gasoline.
Oil futures dropped as Federal Reserve Chairman Ben S. Bernanke said risks to growth and inflation have risen, in testimony to the Senate Banking Committee.
“We’re getting to the point where the market’s looking at an increasing likelihood of a deep recession,” said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
(ARTICLE CONTINUES BELOW)
Crude oil for August delivery fell $7.38, or 5.1 percent, to $137.80 a barrel at 1:13 p.m. on the New York Mercantile Exchange. It was the biggest percentage drop since Dec. 27, 2004. Oil fell as much as $9.26 to $135.92 today. Futures reached a record $147.27 a barrel on July 11 and have risen 86 percent in the past year.
“When it traded below $140, a big wave of selling hit,” said Addison Armstrong, director of market research at TFS Energy LLS in Stamford, Connecticut. “The market was trading a little bit above $140, and when it traded below, it fell something like $2 in a minute. Nothing seemed to hold it. There seems to be a bit of a panic.”
U.S. gasoline demand has fallen for 11 consecutive weeks through July 4, amid record pump prices which topped $4 a gallon for a fourth consecutive week, according to MasterCard Inc.
The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s oil, said it expects demand for its members’ crude will fall in 2009 as the global economy slows. Demand for OPEC crude next year will average 31.2 million barrels a day, a drop of 710,000 barrels a day from the forecast for 2008, the group said in its monthly oil market report today.
Economy Versus Dollar
“The whole U.S. economic scene is sort of being questioned and obviously that would say something about the demand for oil,” said Paul Tossetti, director of oil market analysis at PFC Energy in Washington. “Economic worries have completely pushed out of the way this weaker U.S. dollar.”
Earlier, oil rose amid an expectation that the dollar’s drop against the euro would boost the appeal of crude as a currency hedge.