Slowing demand knocks oil prices

Oil prices have remained low after US government figures showed a sharp slowdown in US demand.

Despite rising 89 cents to $113.51 a barrel in Asian trade, US light sweet crude remained well off recent records above $147 which it hit in July.

Benchmark UK Brent crude rose 89 cents to $111.54, but traders said slowing in US demand is likely to cap prices.

Prices sank on Tuesday after US figures showed a sharp slowdown in domestic demand, triggered by higher fuel costs.

Data from the US Energy Department’s Energy Information Administration (EIA) showed demand for oil in the first half of 2008 saw its sharpest drop in 26 years, compared to a year before.

US demand for oil fell 800,000 barrels per day for the first six months of this year, compared to the same period a year earlier.

The EIA predicts that US oil demand next year will be at its lowest since 2003, at 20.08m barrels per day on “prospects of a weak economy and continuing high crude oil prices”.

The latest figures showed that while US demand dropped sharply, non-industrialised nations saw demand rise by 1.3m barrels per day for the first half of 2008.

Commenting on the data, Kyle Cooper, an analyst with IAF Advisors, said: “It takes a lot of bullish arguments away, but $113 is still not cheap.”

Separately, a plan between Russia and Georgia to end fighting between the two nations eased concerns that supplies in the region could be disrupted.

Though Georgia is not an oil producer, key crude and gas exports are transported through it, and BP had closed all three pipelines through the region as a precautionary measure.