Oil prices drop on report of lower European demand

VIENNA -- Oil prices dropped nearly $1 a barrel yesterday as traders took profits from a recent run-up to new highs, the European Union cut its economic growth forecast, and Federal Reserve chairman Alan Greenspan expressed confidence that market forces would eventually bring oil prices under control.

Speaking via satellite to an energy conference in San Antonio, Greenspan said high prices would spur more energy production and conservation.

Light, sweet crude fell 97 cents to settle at $56.04 a barrel on the New York Mercantile Exchange. Heating oil fell 2.11 cents to $1.6211 a gallon. Unleaded gas fell 3.36 cents to $1.688 a gallon.

Brent crude futures fell 79 cents to settle at $55.44 a barrel on the International Petroleum Exchange in London.

On Monday, Nymex crude for May climbed to an intraday record of $58.28 and Brent rose above $57.

Oil analyst Victor Shum of Texas-based Purvin & Gertz in Singapore said slow economic growth in Europe will ease demand for crude, pushing prices downward.

The European Commission cut its 2005 growth forecast Monday for the second time in six months, with record oil costs weighing heavily on the economies of European nations.

Growth in Europe will slow to 1.6 percent this year, less than the 2 percent predicted in October and down from 2004's rate of 2 percent, said Joaquin Almunia, the EU commissioner for economic and monetary affairs.

Shum cautioned, however, that Europe ''is only one component of the world market."

''The real question is, how is the US economy doing?" he said. ''The oil market has always been US-centric, and US demand appears to be still going strong."