Oil falls to 7-week low as slow demand weighs



Oil has fallen by more than $ 23 a barrel from its record high of $ 147.27 on July 11, marking the biggest fall in dollar terms since futures began trading in New York in 1983. In percentage terms, the 15 percent decline is the steepest pull-back since early 2007.



U.S. light crude CLc1 fell to a session low of $ 123.62 a barrel, the lowest since early June. It had recovered to $ 124.31 by 1126 GMT, up 37 cents from Wednesday’s close.



London Brent crude ticked up 11 cents to $ 125.40, after falling to a seven-week low of $ 124.58.



U.S. crude dropped by about $ 4 on Wednesday after U.S. government data showed a larger-than-expected increase in gasoline stocks, together with weak implied demand. U.S. crude stocks dropped after a sharp decline in imports.



One potentially bullish factor was the threat from a militant group to sabotage oil facilities in exporter Nigeria, but analysts said the market was reacting to existing fundamentals, rather the prospect of future disruption.



"Warnings like this normally would spook the markets into pushing higher," said MF Global in a research note.



"We can only suggest that the market, finally weighed down by the spectre of decreasing energy demand, may not be as responsive to geopolitical headlines as it once was."



The main militant group in Nigeria’s oil-producing Niger Delta said on Wednesday it would attack major oil pipelines in the next 30 days to prove it had not received payment from the government to end its campaign.



Hurricane Dolly, the first major storm this season to menace Gulf of Mexico producers, has been less disruptive than initially feared.



It caused output cuts at some refineries, but spared most offshore oil and natural gas facilities.



Part of the reason for the record run-up in oil prices this year has been the weakness of the U.S. dollar, which encouraged some investors to buy into oil and other dollar-denominated commodities as a hedge against inflation and falls in other asset classes.



Analysts said the falls on oil since the middle of this month and on other commodity markets had coincided with some traders unwinding short-dollar/long-oil positions, which helped to lift the U.S. currency to a one-month high against the yen.



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