Demand worries send crude lower

Crude oil prices dropped Tuesday on more demand concerns, a stronger dollar, and uncertainty about what will happen with the $700 billion government plan to buy up bad debt from the financial sector.

Disagreements and skepticism about the plan made the swift enactment hoped for by the Bush administration look less likely, while there were questions about whether enactment of some form of the plan would be enough to avoid a recession in the US.

November contracts for West Texas Intermediate crude dropped $2.68 to $106.69 per barrel on the New York Mercantile Exchange after climbing more than $6 per barrel yesterday, while Brent crude was down $2.88 to $103.16 per barrel on the ICE Futures Europe exchange in London.

Pressures that kept prices from falling more included an expectation that Saudi Arabia will cut output slightly, violence in Nigeria that has limited its oil exports, and the continuing closure of more than three-fourths of Gulf of Mexico oil production in the wake of Hurricane Ike.

Nymex October gasoline futures were 13 cents lower to $2.58 per gallon at last report, while November heating oil had dropped 5 cents to $3.02 per gallon.