(Updates prices, adds quote, details)
By Annika Breidthardt
SINGAPORE, July 23 (Reuters) - Oil prices fell for the
second session on Wednesday, extending losses from a record
high this month, as fears eased Hurricane Dolly would deal a
blow to oil and gas supply and on rising worries over dwindling
U.S. demand.
A second strong session for the dollar on the back of
comments from a Federal Reserve official suggesting U.S.
interest rates may have to rise also reduced the appeal of
commodities, prompting investors to exit oil.
By 0622 GMT, U.S. light crude for September delivery <CLc1>
fell 73 cents to $127.69 a barrel in its first day of trading
as the front month contract.
On Tuesday, the August contract fell to as low as $125.63
in intraday trading, its weakest since early June.
The decline in U.S. crude extended losses from the July 11
record high over $147 a barrel that marked the steepest price
fall in dollar terms in oil's history -- leading some analysts
to question how soon the market will resume its six-year rally.
"Dolly is not going to hit major production," said Jonathan
Kornafel, Director, Asia of Hudson Capital Energy. "The dollar
strengthened a little yesterday and that had a bit to do with
the fall as well," he added.
Alleviating supply concerns, Hurricane Dolly was still
expected to make landfall well away from the most sensitive
offshore platforms, even after it was upgraded to the Atlantic
season's second hurricane late on Tuesday.
U.S. Gulf of Mexico producers shut 5 percent of oil and
natural gas production by Tuesday but those shutdowns were
expected to be short-lived. []
Oil is however still up almost 30 percent this year and
more than six times higher than in 2002, in a rally driven by
booming demand from fast-growing Asian economies such as China.
London Brent crude <LCOc1> slipped 75 cents to $128.80 a
barrel after falling more than $1 earlier in the session.
Mounting economic woes in the United States and continued
lacklustre energy demand from the world's biggest consumer
nation were key factors behind the drop in oil prices, dealers
said.
"The decline in oil prices reflects concerns that slower
economic growth in the U.S. and high oil prices are crimping
oil demand," said David Moore, commodity strategist at
Commonwealth Bank of Australia.
Remarks by Philadelphia Fed President Charles Plosser that
rising inflation could force the Fed to start raising interest
rates even before financial markets recover amid a surge in
inflation, supported the dollar, in turn hitting crude. []
Market attention was also on U.S. data due later on
Wednesday, which are expected to show crude stocks falling by
700,000 barrels, according to a Reuters poll of analysts
[].
Refinery utilisation was little changed at around 89.5
percent of capacity but inputs of feedstock, or crude runs,
likely dropped, some of the polled analysts said.
The U.S. Energy Information Administration will release its
inventory report for the week to July 18 at 1435 GMT.
(Editing by Anshuman Daga)
