* Oil slips to new 7-week low
* U.S. demand weighs on market
(Updates prices)
By Ikuko Kao and Peter Graff
LONDON (Reuters) - Oil prices slipped to a new
seven-week low Thursday on mounting evidence that high prices
and economic weakness have slowed demand in the world's top
consumer the United States.
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 erased modest earlier gains to fall
to a session low of $123.50 a barrel, the lowest level since
early June. At 1545 GMT the contract was down 18 cents to
$124.26 a barrel.
London Brent crude ticked down 8 cents to $125.21,
after falling to a seven-week low of $124.10.
U.S. crude dropped by about $4 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 than 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 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.
Part of the reason for the record run-up in oil prices this
year has been weakness of the U.S. dollar, which encouraged some
investors to buy oil and other dollar-denominated commodities as
a hedge against inflation and falls in other asset classes.
Analysts said the falls in oil since the middle of this
month and in 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.
Even after the recent price fall, the oil price has still
rallied by almost 30 percent in 2008 and is up from just $20 in
2002 on demand from growing economies like China. Producers have
expressed confidence that strong demand will continue.
"Global demand is heading for an increase and there is no
fear that demand will weaken over the coming five years," Mousa
Marafie, a member of the Supreme Petroleum Council in OPEC
nation Kuwait, told the state news agency KUNA.
"The current decline in prices is in the end a temporary
decline," he said.
(Reporting by Annika Breidthardt in Singapore, Ikuko Kao and
Peter Graff in London, and Simon Webb and Inal Ersan in Kuwait,
editing by Matthew Lewis)
