Oil Trades Near 3-Week Low as Slowing Economies May Cut Demand

By Gavin Evans

Jan. 14 (Bloomberg) -- Crude oil traded near a three-week low in New York on concern slowing global economic growth will trim demand.

Oil dropped 5.3 percent last week as U.S. stocks posted their longest losing streak since August and reports from China, the world's second-biggest energy consumer, showed rising interest rates slowed growth in exports and money supply last month. A U.S. Commerce Department report tomorrow will probably show retail sales growth stalled last month.

``With the stock market falling, it's really very hard to make much of an argument that there's going to be enough demand further out'' to support prices, said Rowan Menzies, strategist at Commodity Warrants Australia Pty in Sydney.

Crude oil for February delivery was at $92.67 a barrel, down 2 cents, in after-hours electronic trading on the New York Mercantile Exchange at 10:55 a.m. in Singapore.

The contract fell $1.02, or 1.1 percent, to $92.69 on Jan. 11, the lowest close since Dec. 20. Prices today are 7.4 percent lower than the record $100.09 a barrel reached on Jan. 3.

Brent crude for February settlement traded at $91.21 a barrel, up 14 cents, on London's ICE Futures Europe exchange at 10:53 a.m. Singapore time. On Jan. 11, the contract fell $1.15, or 1.3 percent, to close at $91.07 a barrel.

Oil Consumers

The U.S., China and Japan, the three biggest oil consumers, are responsible for almost 40 percent of global demand. Last week, Goldman Sachs Group Inc. said the U.S. and Japan are at risk of recession.

While the demand outlook is poor, near-term prices are likely to be supported by the weak U.S. dollar and a flow of investment into rising commodities, Menzies said.

``There just seems to be an enormous amount of fresh capital to allocate into these markets,'' he said.

Hedge fund managers and other large speculators have increased their bets on rising oil prices the past three weeks, according to U.S. Commodity Futures Trading Commission data.

The net-long position in New York oil futures, the difference between contracts to buy and sell the commodity, rose 9 percent to 94,923 contracts in the week ended Jan. 8, the commission said last week.

Open interest in oil contracts reached 1.41 million contracts the same date, the highest since mid-November.