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Oil prices continue fall following bleak news

Waning demand, weak dollar cited

Prices at the gas pumps have begun to reflect the decline in crude oil costs. That should help such boaters as John Mizioch of Salem, who pumped gas into his boat as Diamond Jim passed at Beverly Port Marina yesterday. Prices at the gas pumps have begun to reflect the decline in crude oil costs. That should help such boaters as John Mizioch of Salem, who pumped gas into his boat as Diamond Jim passed at Beverly Port Marina yesterday. (Lisa Poole/ Associated Press)
By Ernest Scheyder
Associated Press / July 7, 2009
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NEW YORK - Oil prices tumbled to a five-week low yesterday on growing evidence of an extended recession that could sap energy demand for some time.

Benchmark crude for August delivery fell $2.68 to settle at $64.05 a barrel on the New York Mercantile Exchange.

It was the fourth straight day of declines on Nymex since hitting a midday high for the year last Tuesday. Crude prices have fallen nearly 13 percent since.

Natural gas prices plunged as well. Major natural gas users, such as industrial manufacturers, have been hit hard by the recession, and unemployment data released last week in both the United States and Europe doused hopes for a quick recovery.

The Labor Department reported Thursday, the final day of trading last week because of the July Fourth holiday, that US economy lost a larger-than-expected 467,000 jobs in June. On the same day, a report from Europe indicated that in the 16 countries that use the euro unemployment spiked to a 10-year high in May.

“The recent evidence concerning the US economy is terrible. The news regarding Europe seems no better,’’ said economist Philip Verleger. “This suggests oil use will continue to decline for another year.’’

Oil prices had been rising for weeks on the belief that the economy would improve by the end of the year.

Prices had also been pushed higher by the weak US currency. Because crude is bought and sold in dollars, it essentially becomes cheaper when the dollar falls. And the dollar has fallen steadily with the US government spending billions to prop up major banks and the auto industry.

Doubts about how long the weak US currency can sustain oil prices have prompted a decline.

Even last week, when oil prices hit an eight-month high above $73 per barrel, it was another sign of how volatile the market has become. A barrel of oil fell midway through the day last Tuesday and prices have been declining since.

The soaring price of energy had baffled experts because demand for everything from crude to gasoline is dismal. The United States is mired in recession, and Americans are driving billions fewer miles than they had in past years.

Retail gasoline prices rose every day for nearly two months as refiners slashed production. That streak finally ended two weeks ago and prices at the pump have fallen every day since.

Gasoline prices fell again overnight to a new national average of $2.611 a gallon, according to the Oil Price Information Service and AAA.

Prices for gasoline are likely to fall even further with the busiest driving weekends for the summer now over, said AAA spokesman Geoff Sundstrom.

“With the economy still limping along, we don’t really see a reason for gasoline demand to increase,’’ he said.

In other Nymex trading, gasoline for August delivery fell 5 cents to settle at $1.7404 a gallon and heating oil slid 7.5 cents to settle at $1.6266.