Oil prices close below $119 by Magdalena Rosova

Oil prices dropped bellow $118 a barrel Wednesday, what is $30 bellow their record.

Crude for September delivery finished the session at $118.58 a barrel. It was the lowest price since May 2. Earlier, prices were as low as $117.11, a 20 percent drop from highest price $147.27 reached July 11. Investors hope it signals the beginning of a bear market.

Falling crude proved at pumps as well. U.S. filling stations cut down the price for a gallon overnight to $3.862, according to information given by auto club AAA, and Wright Express. Prices have now fallen 6 percent from usual highs above $4 a gallon.

Oil market traders are waiting to see whether oil price falls below $117. "There's a line in the sand just below $117. If you close below that, it signals traders are giving up on the bull market in oil," said Tom Kloza, publisher and oil analyst. "Subsequent rallies may take us higher, but the highs for the year have probably been put in.”However, violence in the Middle East or huge hurricane in the Gulf coast, can make oil price soar again.

Crude supplies rose by 1.7 million barrels to 296,9 million while gasoline stockpiles fell by 4.4 million barrels to 209.2 million barrels, which is much more then analysts expected.

The big drop in gas stocks is surprising but analysts say it only signals that distributors have taken more deliveries from the refiners and not that American motorists are boosting their driving after recent pump in prices.

Investors worry again because of tension over Iran's nuclear program. United Nations are seeking new sanctions against Iran after Iran refused to discuss over its nuclear program.

related story: http://news.theage.com.au/world/oil-prices-extend-slide-on-signs-of-demand-decline-20080805-3qgs.html

by Magdalena Rosova for PocketNews (http://pocketnews.tv)

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